EXHIBIT 2.1
Asset Purchase Agreement
This Asset Purchase Agreement (the "Agreement") is made and entered into as
of the 31st day of January, 1997 by and among Consolidated Forest Products,
Inc., a Delaware corporation ("Buyer"), Consolidated Forest Products, L.L.C., a
Alabama limited liability company (the "Company") and the members of the Company
identified as such on the signature page to this Agreement (the "Members,"
which, together with the Company, are hereinafter sometimes referred to
collectively as the "Sellers");
WITNESSETH:
WHEREAS, the Company is presently engaged in the Company's Business; and
WHEREAS, Sellers desire to sell, and Buyer desires to purchase from
Sellers, the Business as well as the Acquisition Assets (as defined in Section
1.1) of the Company, for the consideration and on the terms set forth in this
Agreement; and
WHEREAS, Buyer and the Company have heretofore entered into a letter of
intent dated December 12, 1996 (the "Letter of Intent") pursuant to which Buyer
indicated its intention to acquire all or substantially all of the Acquisition
Assets of the Company; and
WHEREAS, the Letter of Intent contemplated that the parties hereto would
enter into this Agreement;
NOW, THEREFORE, IN CONSIDERATION of the premises, and the representations,
warranties, covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows, intending to be legally bound thereby:
ARTICLE I
The Acquisition
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1.1 Assets to be Sold. Subject to the terms and conditions of this
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Agreement, at the Closing, Company shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from Company, all of
Company's right, title, interest, claims, equities and incidents of ownership in
and to the Acquisition Assets, in each case, free and clear of any Lien, other
than the liens described on Schedule 1.1 (the "Permitted Liens"). The
Acquisition Assets shall mean all of Company's property and assets, real,
personal or mixed, tangible and intangible, of every kind and description,
wherever located, belonging to Company at the close of business on the Closing
Date (as defined in Section 3.3) and which relate to the Business currently
conducted by the Company as a going concern, including the design, manufacture
and sale of its products and services and the furnishing of advisory and
consultative services to
customers as well as any and all goodwill associated therewith, other than the
Excluded Assets (as defined in Section 1.2), including the following:
(a) all fee, leasehold and other title interests in and all real
property, including without limitation the real property described in Schedule
1.1(a), together with all improvements, buildings and fixtures located therein
or thereon and all construction in progress;
(b) all machinery, equipment, fixtures, computer hardware and
software (subject to any restrictions by the licensor on the assignment
thereof), tools, supplies, spare parts, furniture, vehicles and other tangible
personal property and assets owned or leased by Company, including without
limitation those items described in Schedule 1.1(b);
(c) all inventories of raw materials, work-in-process and
finished goods of Company as of the Closing Date, wherever located, including
whether located in or about Company's facilities, in transit to Company's
facilities or in transit to any Company customer, provided that title has not
passed to such Company customer;
(d) all trade accounts receivable and other rights to receive
payments from customers of Company as of the Closing Date, including all trade
accounts receivable representing amounts receivable in respect of goods shipped,
products sold or services rendered to customers of Company on or prior to the
Closing Date, and the full benefit of all securities for such accounts or debts,
and those other accounts receivable and notes receivable (including any claims,
remedies and other rights related to any of the foregoing) listed on Schedule
1.1(d);
(e) all of Company's interest in (including all rights, benefits
and privileges) all written or oral Contracts, described on Schedule 1.1(e), and
all outstanding offers or solicitations to enter into any of the foregoing,
except for the Excluded Assets.
(f) all approvals, consents, licenses, Permits, waivers, or other
authorizations issued, granted, given, or otherwise made available by or under
the authority of any Governmental Entity, or pursuant to any Law or ordinance of
any Governmental Entity or any principal of common law owned, held or utilized
by Company in connection with the ownership of the Acquisition Assets and the
operation of the Business, and all pending applications thereof, in each case to
the extent transferrable to Buyer, including without limitation those listed on
Schedule 1.1(f);
(g) all operating data and records of Company, including client
and customer lists and records, referral sources, research and development
reports and records, production reports and records, equipment logs, operating
guides and manuals, copies of financial, accounting and personnel records,
correspondence and other similar documents and records;
(h) all of the intangible and Intellectual Property of Company,
including all software (including all source codes and object codes), products,
trade secrets, know-how,
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processes, methods, plans, research data, marketing plans and strategies,
forecasts, trademarks, service marks, trade names, patents and patent rights,
logos and copyrights and all applications for trademark, service xxxx, trade
name, patent and copyright registration, including those trademarks, service
marks, trade names, patents, logos and copyrights listed on or described in
Schedule 1.1(h);
(i) all claims of Company against third parties relating to the
Business or the Acquisition Assets, whether xxxxxx or inchoate, known or
unknown, contingent or otherwise, including without limitation all such claims
listed on Schedule 1.1(i);
(j) all insurance proceeds arising in connection with damage to
the Acquisition Assets occurring prior to the Closing Date, to the extent not
expended for the repair or restoration of the Acquisition Assets;
(k) those prepaid expenses relating to the Acquisition Assets
which are listed on Schedule 1.1(k);
(l) the going concern value and goodwill of Company;
(m) all other properties and assets of every kind, character or
description, tangible or intangible, owned by Company and used or held for use
in connection with the Business, to the extent assignable in the case of
intangible properties and assets, whether or not similar to the items
specifically set forth above; and
(n) all bank accounts, investment accounts and investments of the
Company, except for one bank account to be established by the Company for
purposes of receiving the Purchase Price, which bank account as of Closing will
have a balance of less than $100.
1.2 Excluded Assets. Notwithstanding anything to the contrary contained
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in Section 1.1 or elsewhere in this Agreement, the following items
(collectively, the "Excluded Assets") are not part of the sale and purchase
contemplated hereunder, are excluded from the Acquisition Assets being conveyed
hereunder, and shall remain the property of Company:
(a) the minute books and membership ownership records of Company;
(b) all of Company's Contracts listed in Schedule 1.2(b);
(c) all personnel records, income tax returns, work papers
directly relating to income tax returns and other records which Company is
required by Law to retain in its possession;
(d) all rights and funds in connection with retirement, employee
benefit and similar plans;
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(e) any assets expressly designated in Schedule 1.2(e) as
Excluded Assets; and
(f) any and all other assets designated by Buyer, in its sole
discretion, as being Excluded Assets. Buyer shall advise Company in writing at
least five (5) days prior to Closing of those other items which Buyer does not
intend to purchase. The exclusion of any such items shall not reduce the
Purchase Price.
1.3 Instruments of Conveyance. In order to effectuate the transfer of the
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Acquisition Assets contemplated by Section 1.1 of this Agreement, at the Closing
on the Closing Date, Sellers will execute and deliver, or cause to be executed
and delivered, dated the Closing Date, (i) all such general and special warranty
deeds (in recordable form) as may be required in connection with the purchase of
the Acquisition Assets; (ii) Bills of Sale and Assignments, including a Xxxx of
Sale and General Assignment in the form of Exhibit A attached hereto (the "Xxxx
of Sale"); (iii) Certificates of Title; (iv) all of the Company's Leases,
Contracts and commitments (to the extent any of same are Assumed Liabilities),
books and records, and all other data relating to the Acquisition Assets, the
Business, and the Company's operations; and (iv) other documents or instruments
of assignment, transfer or conveyance, as Buyer shall reasonably deem necessary
or appropriate to vest in or confirm to Buyer good, marketable and indefeasible
title to the Acquisition Assets, free and clear of any and all Liens except as
otherwise expressly permitted in this Agreement. Concurrent with such delivery,
Seller shall take or cause to be taken all action requisite to put Buyer in
actual possession and operating control of the Acquisition Assets and the
Business, and shall cooperate with Buyer in consolidation and transfer of all
books and records attendant to the Company's Business, other than those assets
which are Excluded Assets.
1.4 Assumption of Liabilities.
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(a) Assumed Liabilities. On the Closing Date, Buyer shall
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deliver to Company an undertaking and assumption, in the form of Exhibit B
hereto (the "Assumption Agreement"), pursuant to which Buyer shall assume and
agree to discharge only the liabilities and obligations specifically enumerated
on Schedule 1.4(a) (the "Assumed Liabilities") and no others.
(b) Retained Liabilities. Except as otherwise specifically set
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forth in Section 1.4(a) of this Agreement, Buyer shall not assume any
liabilities or obligations of the Company of any kind, whether such liabilities
or obligations relate to payment, performance or otherwise, are matured or
unmatured, are known or unknown, are contingent or otherwise, are fixed or
absolute, or are present, future or otherwise (the "Retained Liabilities"), it
being understood that all of the Retained Liabilities shall remain the sole
responsibility and obligation of, and shall be retained, paid, performed and/or
discharged solely by, Sellers. Except as set forth in Schedule 1.4(a), the
following shall be considered "Retained Liabilities" of the Company for the
purposes of this Agreement:
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(i) any liability or obligation of the Company arising
under this Agreement;
(ii) any liability or obligation arising from any product
liability claim not specifically assumed by Buyer pursuant to Section 1.4(a) in
respect of goods or products of the Business manufactured or sold prior to the
Closing Date;
(iii) any liability or obligation for any Tax and any
related charge or amount (including any fine, penalty, interest, or addition to
Tax), imposed, assessed, or collected by or under the authority of any
Governmental Entity or payable pursuant to any Tax-sharing agreement or any
other Contract relating to the sharing or payment of any such Tax, levy,
assessment, tariff, duty, deficiency, or fee, including without limitation (1)
any Taxes arising as a result of Company's operation of the Business or
ownership of the Acquisition Assets before the Closing Date, (2) any Taxes that
will arise as a result of the sale of the Acquisition Assets pursuant to this
Agreement, and (3) any liability for deferred Taxes of any nature;
(iv) any cost, damage, expense, liability, obligation, or
other responsibility arising from or under any Law or other requirement relating
to (a) the soil, land surface or subsurfaced strata, surface waters (including
navigable waters and ocean waters), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource, or any Environmental Law, or (b)
public or employee health and safety or designated to provide safe and healthful
working conditions and to reduce occupational safety and health hazards, and any
program, whether governmental or private (such as those promulgated or sponsored
by industry association and insurance companies), designed to provide safe and
healthful working conditions and to reduce occupational safety and health
hazards, and any program, whether governmental or private (such as those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions ("Occupational Safety
and Health Law"); (c) fines, penalties, judgments, awards, settlements, legal or
administrative Proceedings, damages, losses, claims, demands and response,
remedial, or inspection costs and expenses arising under any Environmental Law
or Occupational Safety and Health Law; (d) financial responsibility under any
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by any applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Entity or any other
Person) and for any natural resource damages; or (e) any other compliance,
corrective, or remedial measures required under any Environmental Law or
Occupational Safety and Health Law, including any Costs of Remediation;
(v) any liability or obligation arising under any Contract
that is not assumed by Buyer under this Agreement;
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(vi) any liability or obligation to indemnify any member,
officer, manager, employee or agent of Company;
(vii) any liability or obligation relating to accrued
payroll, accrued vacation, accrued sick leave, pension benefits, employee stock
option or profit-sharing plans, health care plans or benefits, Employee Benefit
Plans or any other benefits of any kind for employees or former employees, or
both;
(viii) any liability or obligation under any Employee
Benefit Plans or other employment, severance, retention or termination
agreement with any employees of Company or any Person;
(ix) any liability or obligation arising out of or related
to any employee grievance commenced or relating to periods prior to the Closing
Date whether or not the affected employees become employees of Buyer;
(x) any liability or obligation under any Contract that is
transferred to Buyer as part of the Acquisition Assets which arises after the
Closing Date and which is attributable to or associated with (1) any breach of
or default under (or an event which, with the passing of time or the giving of
notice, or both, constitutes a breach of or default under) any such transferred
Contract, which breach, default or event occurred prior to the Closing Date, or
(2) any service provided or to have been provided by Company under any such
transferred Contract prior to the Closing Date;
(xi) any liability or obligation to distribute to the
Members of Company or otherwise apply all or any part of the consideration
received hereunder;
(xii) any Proceeding commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Entity or other
Person whether or not set forth in any Exhibit or Schedule delivered to Buyer,
or any other Proceeding arising out of, or relating to, any occurrence or event
happening before the Closing Date;
(xiii) any liability or obligation arising out of or
resulting from Company's non-compliance with any Law or any order, injunction,
judgment, decree, ruling, assessment or arbitration award;
(xv) any liability or obligation based upon acts or
omissions of Company occurring after the Closing Date;
(xvi) any other liability or obligation of Company,
including any liability or obligation directly or indirectly arising out of or
relating to the operation of the Business or ownership of the Acquisition Assets
prior to the Closing Date, whether contingent or otherwise,
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fixed or absolute, known or unknown, matured or unmatured, or present, future or
otherwise, except for the Assumed Liabilities; and
(xvii) any bodily injury (including illness, disability and
death, and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person or any Acquisition Assets in any way arising
from or allegedly arising from any activity involving Hazardous Materials
conducted with respect to the Acquisition Assets prior to the Closing Date, or
from Hazardous Materials that were (1) present or suspected to be present on or
before the Closing Date on or at the Facilities (or present or suspected to be
present on any other property, if such Hazardous Materials emanated or allegedly
emanated from any of the Facilities and were present or suspected to be present
on any of the Facilities on or prior to the Closing Date) or (2) released or
allegedly released on or at any Acquisition Assets at any time on or prior to
the Closing Date.
ARTICLE II
Purchase Price; Allocation of Purchase Price
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2.1 Purchase Price. In reliance upon the representations, warranties,
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covenants and agreements of Sellers contained herein, and in consideration of
the sale, transfer, assignment and delivery by Sellers to Buyer of the
Acquisition Assets and the Business, Buyer hereby agrees to purchase the
Acquisition Assets and the Business, pursuant to Section 1.1 hereof, assume the
Assumed Liabilities, and pursuant to Article III hereof, pay to the Company as
full and complete payment for the Acquisition Assets and the Business, the
Purchase Price calculated and payable as set forth in Article III hereof.
2.2 Allocation. The Purchase Price shall be allocated among the
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Acquisition Assets as specified in Schedule 2.2 hereof. After the Closing, the
parties agree to make consistent use of the allocation, fair market value and
useful life specified in Schedule 2.2 for all Tax purposes and in any and all
filings, declarations and reports with the IRS in respect thereof, including
without limitation, the reports required to be filed under Section 1060 of the
Code, if applicable, it being understood that Buyer shall prepare and deliver
IRS Form 8594 to Sellers within forty-five (45) days after the Closing Date if
such form is required to be filed with the IRS. In any Proceeding related to
the determination of any Tax, neither Buyer nor Sellers shall contend or
represent that such allocation is not a correct allocation.
ARTICLE III
Calculation and Payment of Purchase Price; Closing
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3.1 Calculation; Payment. At the Closing, on the Closing Date, Buyer
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shall pay to the Company as the Purchase Price for the Acquisition Assets and
the Business (the "Purchase
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Price") an amount equal to the sum of (a) $12,050,000 (the "Cash Portion"), (b)
a promissory note in the original principal amount of $250,000, which will be
subject to an offset following the Closing Date, to the extent the current
assets of the Company purchased less the Assumed Liabilities are less than
$400,000 (the "Shortfall") and in the form of Exhibit C hereto (the "Short-Term
Note"), and (c) a promissory note in the original principal amount of $700,000,
subject to offset by the amount of the Shortfall in excess of the original
principal amount of the Short-Term Note, if any, and in the form of Exhibit D
hereto (the "Promissory Note") which, together with the Short-Term Note, are
hereinafter referred to as the "Notes"), and (d) the Assumed Liabilities. The
Purchase Price for the Acquisition Assets of the Company and the Business shall
be paid by Buyer to the Company at the Closing on the Closing Date by Buyer (a)
delivering to the Company the Cash Portion by wire transfer to an account
specified by the Company, (b) executing and delivering to the Company the Notes,
and (c) executing and delivering to the Company the Assumption Agreement.
3.2 Offset Against Notes.
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(a) (i) In order to determine whether a Shortfall exists as of
the Closing Date, promptly following the Closing, the books and records of the
Company shall be audited by the Accountants, such audit to be performed in
accordance with generally accepted auditing standards, consistently applied. The
Accountants shall make their determination as to whether there is a Shortfall
within 60 Days of the Closing. The Accountants' determination of the Shortfall,
if any (subject to Buyer's right to mediation and arbitration under Section
15.14) shall be final when so determined. If the Accountants determine there is
a Shortfall and if the Shortfall is greater than the principal amount of, and
accrued but unpaid interest on, the Promissory Note, then and in such event, the
Promissory Note shall be marked "cancelled" by the Company and shall be
delivered to Buyer, together with such additional amount in cash which, when
added to the Promissory Note, both principal and interest, shall equal the
Shortfall, or at Buyer's option, such additional amount may be satisfied, in
whole or in part, by offset against the Short-Term Note.
(ii) Whether a Shortfall exists shall be determined after
taking into account, and after giving effect to, the Tax Distributions
contemplated by this Agreement. At Closing, Sellers shall estimate the Tax
Distributions with respect to the earnings of the Company as of the close of
business on the last Business Day immediately preceding the date of Closing. For
purposes of determining the actual Tax Distributions, as soon as reasonably
practicable following Closing, the Accountants shall determine, for federal,
state and local income Tax purposes, the earnings of the Company and the
aggregate federal, state and local income Tax payable by the Members by reason
of the net taxable income attributable to each of them from the pass through of
income, credits, deductions and other allocable items under the Code for the
Company's 1997 fiscal year through the last Business Day immediately preceding
the date of Closing (the "Tax Liability"). To the extent the Tax Distributions
made to the Members of the Company for the Company's 1997 fiscal year through
the last Business Day immediately preceding the date of Closing are less than
the Tax Liability (the "Tax Liability Shortfall"), upon
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receipt from the Accountants of their determination of the Tax Liability, Buyer
shall cause to be distributed to the Company or the Members of the Company, the
Tax Liability Shortfall. At such time as it is determined by the Accountants
that the Tax Distributions made were in excess of the Tax Liability of the
Members, the Members shall immediately pay to Buyer or shall cause the Company
to pay to Buyer the amount of such excess.
(b) Any reduction in the principal amount of either of the Notes,
or both, pursuant to Section 3.2(a) hereof shall be deemed to be applied in the
reduction of, and shall constitute a payment or prepayment of the principal and
any accrued but unpaid interested remaining owing on, either of the Notes, or
both, and the Company shall endorse the amount of such credit upon the reverse
side of said Notes, and shall confirm same in writing to Buyer.
(c) In addition to possible reduction in the Notes as provided by
Section 3.2(a) hereof, it is agreed and understood that the indebtedness
evidenced by the Notes shall be and remain subject to possible reduction by
having credited against the Notes, whether principal or interest, any amounts
for which Sellers may be liable to Buyer pursuant to Article XII for Damages as
provided therein. Any such credit shall be deemed to be applied in the reduction
of, and shall constitute a payment or prepayment of the unpaid balance of,
principal and any accrued but unpaid interest then remaining owing on the Notes
as Buyer elects, and the Company or other holders of the Notes shall endorse the
amount of such credit upon the reverse side of said Notes and shall confirm same
in writing to Buyer; provided, however, any such credit shall not be applied if
Sellers, at their option, elect to pay the amount of such credit in cash to
Buyer; and provided further, that in the event the Notes have been paid in full,
Sellers shall remit the amount of such Damages (up to the Cap Amount) in cash to
Buyer immediately upon demand. Buyer's offset rights against the Notes shall be
in addition to, but not in lieu of, Buyer's rights against Sellers for
indemnification as provided in Article XII, it being the intent of the parties
that the liability of Sellers to Buyer for indemnification and Damages shall,
subject to the Cap Amount, be for the full amount thereof, rather than being
limited to the outstanding balance of the Notes. Offsets against the Notes with
respect to principal and/or interest shall be applied as provided in the Notes.
All rights, remedies and privileges of Buyer for indemnification and Damages
against Sellers shall be the several, and not joint and several obligation, of
Sellers.
3.3 Closing and Closing Date. The Closing of the transactions
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contemplated hereby (the "Closing") shall take place (i) at the offices of
Xxxxxxx & Xxxxxxx, L.L.C., Birmingham, Alabama on the later of February 28,
1997, or ten (10) Business Days after each of the conditions precedent set forth
in ARTICLES IX and X have been satisfied or waived, or (ii) at such other place
or on such other date as Buyer and Sellers shall agree (the "Closing Date").
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ARTICLE IV
Representations and Warranties of Sellers
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Sellers represent and warrant, severally, and not jointly and severally,
to Buyer that:
4.1 Organization; Authority. Company is a limited liability company duly
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organized, validly existing and in good standing under the Laws of the state of
Alabama and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
4.2 Qualification. The Company is duly qualified to do business and
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is in good standing in each jurisdiction identified on Schedule 4.2. The
Company is not required to be qualified or licensed to do business in any other
jurisdictions where the failure to be so qualified or licensed would,
individually or in the aggregate, have a Material Adverse Effect.
4.3 Constituent Documents. The Company has delivered to Buyer accurate
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and complete copies of the Articles of Organization and Operating Agreement of
the Company as currently in effect.
4.4 Authority Relative to This Agreement.
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(a) Sellers have all requisite power and authority to execute,
deliver, and perform their respective obligations under this Agreement and each
of the Ancillary Agreements (to the extent they are parties thereto). The
execution and delivery by Sellers of this Agreement and each of the Ancillary
Agreements (to the extent they are parties thereto), and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary action on the part of Sellers.
(b) This Agreement constitutes, and each of the Ancillary
Agreements upon its execution will constitute, the legal, valid and binding
obligation of Sellers (to the extent they are parties thereto), enforceable in
accordance with their respective terms, except to the extent such enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar Laws affecting creditors' rights generally and (ii)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performance) in certain instances. Except as
described on Schedule 4.4(b) hereto, the execution, delivery and performance by
Sellers of this Agreement and each of the Ancillary Agreements (to the extent
they are parties thereto), and the consummation of the transactions contemplated
hereby and thereby, do not require the consent, waiver, approval, license or
authorization of any Person (except as already obtained).
4.5 Non-Contravention. Except as set forth on Schedule 4.5, the
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execution, delivery, and performance by Sellers of this Agreement and each of
the Ancillary Agreements (to the
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extent they are parties thereto) and the consummation by each of them of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with, or result in a violation of any provision of, the Articles of
Organization, regulations or operating agreement of Company, (ii) conflict with,
or result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, Contract, agreement, or other instrument or
obligation to which any of Sellers is a party or by which any of Sellers or
their respective business or any of their respective owned or leased assets may
be bound, (iii) conflict with or result in a violation of any provision of any
Members' agreement, voting agreement, voting trust agreement, stock pledge
agreement, loan agreement or other Contract by which any of Sellers may be
bound, (iv) result in the creation or imposition of any Encumbrance upon any of
the assets of any of Sellers, or (v) assuming compliance with the matters
referred to in Section 4.6, violate any Applicable Law binding upon any of
Sellers.
4.6 Governmental Approvals. Except for consents required under the
----------------------
HSR Act, no consent, approval, order, or authorization of, or declaration,
filing, or registration with, any Governmental Entity is required to be obtained
or made by any of Sellers in connection with the execution, delivery, or
performance by Sellers of this Agreement or any of the Ancillary Agreements (to
the extent they are parties thereto) or the consummation by Sellers of any of
the transactions contemplated hereby or thereby, other than (i) as set forth on
Schedule 4.6; and (ii) such consents, approvals, orders, or authorizations
which, if not obtained, and such declarations, filings, or registrations which,
if not made, would not, individually or in the aggregate, have a Material
Adverse Effect on the business, assets, results of operations, condition
(financial or otherwise), or prospects of the Company considered as a whole or
on the ability of Sellers to consummate the transactions contemplated hereby.
4.7 Financial Statements.
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(a) The Company has delivered to Buyer accurate and complete copies of
(i) the Company's audited financial statements described on Schedule 4.7(a) (the
"Audited Financial Statements"), and (ii) the Company's unaudited financial
statements described on Schedule 4.7(a) (the "Company's Unaudited Financial
Statements"), certified by the Company's chief financial officer (the financial
statements referred to in (i) and (ii) being collectively referred to as the
"Financial Statements"). Until Closing, the Company will deliver to Buyer as of
the end of each calendar month preceding Closing true and correct copies of the
Company's Unaudited Financial Statements of the type described on Schedule
4.7(a) (the "Supplementary Unaudited Financial Statements"). As used herein,
the term "Financial Statements" shall mean the Financial Statements and the
Supplementary Unaudited Financial Statements. The Financial Statements (i)
represent actual bona fide transactions, (ii) except as described on Schedule
4.7(a) have been prepared from the books and records of the Company in
conformity with GAAP, applied on a basis consistent with preceding years
throughout the periods involved and (iii) fairly present the Company's financial
position as of the respective
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dates thereof and its results of operations, retained earnings and cash flows
for the periods then ended.
(b) The Company has delivered to Buyer copies of the financial
statements for the Company described on Schedule 4.7(b) (the "Projected
Financial Statements"). The Projected Financial Statements have been prepared
by the Company in good faith, based upon information and assumptions reasonably
believed by it to be sound and accurate and represent, to the best knowledge and
belief of Sellers, reasonable projections as to the future operations and
financial performance of the Company. Buyer acknowledges, however, that the
Projected Financial Statements are based on a number of assumptions that are
subject to significant uncertainties and contingencies, that there is no
assurance that the results indicated on the Projected Financial Statements will
be realized, and that actual results may be higher or lower than those shown on
the Projected Financial Statements. Buyer further acknowledges that the
Projected Financial Statements are based wholly or in part on industry
information and trends which are subject to various interpretations and
extrapolations and that Sellers make no representation, warranty or other
assurance as to the attainability of the financial condition or operating
results shown on the Projected Financial Statements.
4.8 Business Information. The Company has delivered to Buyer
--------------------
accurate and complete copies of the information with respect to the Company
described on Schedule 4.8 (collectively the "Business Information"). As of the
date hereof, the information contained in the Business Information is true and
correct in all Material respects and does not omit any Material fact necessary
to be stated therein or required to be stated therein in order to make any
statement contained therein not misleading.
4.9 No Undisclosed Liabilities. Except as set forth in Schedule 4.9,
--------------------------
the Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Financial
Statements and current liabilities incurred in the ordinary course of business
of the Company since the respective dates thereof which might, individually or
in the aggregate, subsequent to the Closing reasonably be expected to have a
Material Adverse Effect on the Company's Business, assets, results of
operations, conditions (financial or otherwise), or prospects of the business of
the Company, or the ownership or operation of the Company's assets or any
Material portion thereof.
4.10 Bank Accounts; Accounts Receivable; Investments.
------------------------------------ -----------
(a) Schedule 4.10(a) contains a complete and accurate list of all
bank depositories for funds of the Company, the style of each account and the
account number at each depository, and the person or persons authorized to draw
funds therefrom.
(b) All accounts receivable being sold by the Company that are
reflected on the Financial Statements or on the accounting records of the
Company as of the Closing Date
12
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business of the Company. Except to the extent paid prior
to the Closing Date, the Accounts Receivable are and will be as of the Closing
Date current and collectible net of the respective reserves shown on the
Financial Statements or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing Date
than the reserve reflected in the Financial Statements represents of the
Accounts Receivable reflected therein and will not represent a Material adverse
change in the composition of such Accounts Receivable in terms of aging). There
is no contest, claim, or right of off-set, other than returns in the ordinary
course of business of the Company, under any Contract with any maker of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Schedule 4.10(b) contains a complete and accurate list of all
Accounts Receivable as of the date of the Financial Statements, which list sets
forth the aging of such Accounts Receivable.
(c) Schedule 4.10(c) contains a complete and accurate listing of all
investments of the Company, and if any of such investments are under the
direction or control of any financial institution or depository, the name of
each such institution or depository, the style of account maintained at each
such institution or depository, the person or persons authorized to give
instructions with respect to such accounts and the principal contact person at
each such institution or depository.
4.11 Inventory. All inventory and raw materials of the Company,
---------
whether or not reflected in the Financial Statements, are in good condition and
consist of a quality and quantity usable and salable in the ordinary course of
business of the Company, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Financial Statements or on the accounting records of the Company as
of the Closing Date, as the case may be. All inventories not written off have
been priced at the lower of cost or market on a first in, first out basis.
Inventory now on hand was acquired in the ordinary course of business of the
Company at a cost not exceeding market prices prevailing at the time of
purchase. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company. Work-in-process inventory is now and will
be valued on the Closing Date according to GAAP.
4.12 Contracts.
---------
(a) Schedule 4.12(a) lists all Material Contracts of the Company
wherein the Company is obligated to provide goods or services, or wherein the
Company is obligated to purchase goods or services.
13
(b) Schedule 4.12(b) lists all other Material Contracts of the
Company, as well as all Contracts covering any Employee Benefit Plans, including
any executive compensation arrangements, change in control agreements or
severance plan or arrangement for any current or former employee of the Company.
4.13 Real Property.
-------------
(a) Schedule 4.13(a) lists all real property owned by Company (the
"Owned Real Property"). The Company holds good and marketable title to all of
its Owned Real Property and improvements thereon, free and clear of any
Encumbrances thereon except as set forth on Schedule 4.13(a). None of the Owned
Real Property is subject to any right or option of any other Person to purchase
or otherwise obtain title to all or any portion of such property.
(b) Schedule 4.13(b) contains a list of all leases, licenses,
Permits, subleases, and occupancy agreements, together with any amendments
thereto (the "Leases") with respect to (i) all real property leased by the
Company (as lessee and including those in the names of nominees or other
entities) and used or occupied in connection with Company's Business (the
"Leased Property"), and (ii) all real property leased or subleased by the
Company, as lessor or sublessor, to third parties. Except as identified on
Schedule 4.13(b), true, complete and accurate copies of the Leases have been
delivered to Buyer, and each of such Leases is in full force and effect without
modification or amendment from the form delivered. No option has been exercised
under any of such Leases, except options whose exercise has been evidenced by a
written document, a true, complete and accurate copy of which has been delivered
to Buyer with the corresponding Lease. Neither the Company nor any of the other
parties to the Leases is in default under any of the Leases, and no Material
amount due under the Leases remains unpaid, no Material controversy, claim,
dispute or agreement exists between the parties to the Leases, and no default
has occurred which with the giving of notice or with the passage of time, or
both, would constitute a default thereunder.
(c) Except as set forth on Schedule 4.13(c):
(i) Sellers have not received any notice of any violation of
any Applicable Laws (including, without limitation, the Americans with
Disabilities Act) in respect of the Owned Real Property or Leased Property,
which has not been heretofore remedied, and to the best Knowledge and belief of
Sellers, there does not exist any such violations which, individually or in
combination with any others, Materially and adversely affects the ability of the
Company to use the affected parcels of Owned Real Property or Leased Property in
the manner and scope in which it is now being used or operated;
(ii) Sellers have not received any notice, nor do any of Sellers
have any Knowledge, that any operations on or uses of the Owned Real Property or
Leased Property constitute non-conforming uses under any Applicable Laws; and
14
(iii) Sellers do not have any Knowledge, nor have any of Sellers
received any notice of, any pending, threatened or contemplated rezoning
proceeding affecting the Owned Real Property or Leased Property.
(d) Except as set forth in Schedule 4.13(d), Sellers have not
received any notice from any insurance carrier regarding defects or inadequacies
in the Owned Real Property or Leased Property, which, if not corrected, would
result in termination of the Company's insurance coverage therefor or an
increase in the cost thereof.
(e) Except as set forth on Schedule 4.13(e), there is no pending or,
to the Knowledge of Sellers, threatened:
(i) Condemnation of any part of the Owned Real Property or the
Leased Property by any Governmental Entity;
(ii) Assessment against any part of the Owned Real Property or
the Leased Property; or
(iii) Litigation against the Company for breach of any
restrictive covenant affecting any part of the Owned Real Property or Leased
Property.
(f) Except as set forth on Schedule 4.13(f), to Sellers' Knowledge,
there are no defects in the condition of, or repair problems with respect to the
improvements located on, the Owned Real Property in excess of $20,000.00 as to
any one item or $50,000.00 in the aggregate. The Company's Leased Property has
been maintained in accordance with any leases or other Contracts with respect
thereto and to Sellers' Knowledge is in good operating condition and repair
(subject to normal wear and tear).
(g) The Company has delivered to Buyer complete copies of all title
insurance policies, insurance policies, title reports, other title documents,
surveys, certificates of occupancy, and Permits in the possession of the Company
and requested by Buyer for review relating to the Owned Real Property or Leased
Property or any of the buildings, improvements or fixtures situated thereon.
4.14 Personal Property.
-----------------
(a) Schedule 4.14 contains a list of the Company's material owned or
leased personal property as of the date hereof. The Company owns outright and
has good and marketable title to all its personal property subject to no Lien
except for Permitted Liens, or as set forth on Schedule 4.14(a), or if leased by
the Company, in each case under valid and enforceable leases.
15
(b) Except as set forth on Schedule 4.14(b), the Company's personal
property that is presently being used in the Business: (i) in the aggregate is
adequate to conduct its business in substantially the manner currently
conducted; (ii) is suitable for the purposes for which it is currently used;
(iii) to Sellers' Knowledge, has no defects in excess of $10,000.00 as to any
one item or $25,000.00 in the aggregate; and (iv) has been maintained in
accordance with any leases or other contracts with respect thereto and, to
Sellers' Knowledge, is in good operating condition and repair (subject to normal
wear and tear).
(c) Set forth on Schedule 4.14(c) is a list and brief description,
including, but not limited to, cancellation terms and annual lease payment terms
of each personal property lease under which the Company is the lessee of
personal property used in connection with the operation of its business (the
"Personalty Leases"). The Company has been in peaceable possession of the
property covered by each such Personalty Lease since the commencement of the
original term of such Personalty Lease. The Company is not in breach of or in
default under, nor has any event occurred which (with or without the giving of
notice or the passage of time or both) would constitute a default by the Company
under any of such Personalty Leases except where such breach, default or event
would not reasonably be expected to have a Material Adverse Effect on the
business, assets or prospects of the Company's Business or the use or operation
of such leased personal property or any Material portion thereof; and the
Company has not received any notice from, or given any notice to, any lessor
indicating that the Company or such lessor is in breach of or in default under
any of such Personalty Leases.
4.15 Permits. Schedule 4.15 sets forth a list of each Permit that is
-------
Material to or necessary for the conduct of the Company's Business or the
ownership or use of its assets as currently or currently proposed to be
conducted, owned and used by the Company, the date such Permits were obtained,
the date of renewals thereof, and the status of each Permit. All Permits
included on Schedule 4.15, except as noted therein, are in full force and effect
and no Proceeding is pending or threatened to revoke or limit any such Permit.
Schedule 4.15 sets forth a list of those Permits (i) which are necessary for the
conduct of the business after the Closing Date, and which are non-assignable;
(ii) which will terminate or (iii) which must otherwise be amended upon the
consummation of the transactions contemplated by this Agreement.
4.16 Intellectual Property. Schedule 4.16 contains a list of all
---------------------
Intellectual Property in which the Company has any right, title or interest or
which has been used in connection with, or which relates to, its Business.
Except as set forth in Schedule 4.16, the Company either owns or has the right
to use by license, sublicense, agreement, or permission all of the Intellectual
Property set forth on Schedule 4.16. Except as otherwise set forth in Schedule
4.16, the Company has not granted a license, nor reached an understanding with
any third party, nor entered into a written agreement, relating in whole or in
part, to any of the Intellectual Property of the Company used in connection with
the conduct of its Business, and there has been no assertion thereof by any
Person. To the Knowledge of the Company, there is no infringement or other
adverse claim against the rights of the Company with respect to any of the
Intellectual
16
Property used or owned by the Company in connection with the conduct of its
business. Schedule 4.16 lists separately the Company's trademarks and trade
names (the "Trademarks and Trade Names"). The Company has not been charged
with, nor, to the Knowledge of the Company, is it threatened to be charged with,
nor is there any Basis for any charge of, with respect to its Trademarks and
Trade Names, the infringement or other violation of the Intellectual Property
rights of any other Person. In connection with the conduct of its Business, the
Company, with respect to its Trademarks and Trade Names, has not infringed, nor
is it infringing, any Intellectual Property right of any other Person.
4.17 Insurance.
---------
(a) Schedule 4.17(a) sets forth a list of all material insurance
policies providing coverage for the properties or operations of the Company's
Business, the type and amount of coverage, and the expiration dates of the
policies. Such current policies are valid and enforceable in accordance with
their terms, are in full force and effect and insure against risk and
liabilities to the extent and in the manner deemed appropriate and sufficient by
the Company. The Company has not received notice from any insurance carrier:
(i) threatening a suspension, revocation, modification, or cancellation or any
insurance policy or a Material increase in any premium in connection therewith,
or (ii) informing the Company that any coverage listed on Schedule 4.17(a) will
not or may not be available in the future on substantially the same terms as now
in effect.
(b) Set forth on Schedule 4.17(b) is a list of the aggregate claims
and all individual claims with respect to product liability relating to the
Company's Business in the last five (5) years. Except as set forth on Schedule
4.17(b), there is no claim pending under any of the policies listed in Schedule
4.17(b) hereto as to which coverage has been questioned, denied or disputed by
the underwriters of such policies.
(c) The Company has not been refused any insurance with respect to
its assets or its business by any insurance carrier to which the Company has
applied for any such insurance or with which the Company has maintained
insurance during the preceding three years with the reason for such refusal
arising as a result of the operations of the Company's business.
4.18 Customers and Suppliers. Schedule 4.18 sets forth a complete
-----------------------
and correct list of (i) the 25 largest customers by aggregate dollars of net
sales of the Company during the Company's last full fiscal year, and (ii) the 10
largest suppliers by dollar volume of the Company and the aggregate dollar
volume of purchases by the Company for such fiscal year. Except as set forth on
Schedule 4.18, none of such customers or suppliers has, or to the Knowledge of
the Company, intends to, terminate or change significantly its relationship with
the Company's business.
4.19 Capital Expenditures. Schedule 4.19 sets forth a complete and
--------------------
correct list of all capital expenditures, purchases of equipment and maintenance
expenditures, in excess of
17
$100,000.00, with respect to the Company's business (a) undertaken (i) for the
past two (2) fiscal years and (ii) from the period from September 30, 1996
through the date of the latest of the Company's Unaudited Balance Sheets
delivered to Buyer, and (b) undertaken, planned or committed since the date
thereof.
4.20 Employees. Set forth on Schedule 4.20 is a list of the name,
---------
social security number, and dates of employment by the Company of each employee
of its business as of December 1, 1996, together with a description of the
position for each employee whose annual compensation exceeds $50,000.00 and the
total amounts of salary, bonuses, and other compensation paid or payable by the
Company to each such employee for the current fiscal year and the immediately
preceding fiscal year.
4.21 Financial Requirements. Set forth on Schedule 4.21 is a list
----------------------
and brief description of all bonds, deposits, financial assurance requirements,
and insurance coverage required to be submitted to Governmental Entities for the
continued ownership and operation of the Acquisition Assets and the operation of
the Company's Business.
4.22 Books and Records. Except as set forth on Schedule 4.22, all
-----------------
the books and records of the Company relating to the Acquisition Assets and the
Company's Business, including all personnel files, employee data, and other
material relating to employees of its business, are substantially complete and
correct in all material respects, have been in all material respects maintained
in accordance with good business practice and all Applicable Laws, and in the
case of the books of account, have been prepared and maintained in accordance
with GAAP consistently applied. Such books and records accurately and fairly
reflect, in reasonable detail, all Material transactions, assets, and
liabilities of the Company with respect to its business.
4.23 Condition and Sufficiency of Assets. Except as set forth on
-----------------------------------
Schedule 4.23, to Sellers' Knowledge, the buildings, improvements, plants,
structures, and equipment being sold by the Company have no Material defects,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, improvements, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not Material in nature or
cost. The buildings, improvements, plants, structures, and equipment being sold
by the Company are sufficient for the continued conduct of the Business after
the Closing in substantially the same manner as conducted prior to the Closing.
4.24 Absence of Certain Changes. Except as disclosed on Schedule
--------------------------
4.24, since the date of the Company's Audited Financial Statements (i) there has
not been any change in, or an event or condition that might reasonably be
expected to result in any change in, the business, assets, or prospects of the
Company's Business or the ownership or operation of the Company's assets or any
Material portion thereof that would have a Material Adverse Effect; (ii) the
Company's Business has been conducted only in the ordinary course consistent
with past practice; (iii) the Company has not, in respect of its Business,
incurred any Material liability,
18
engaged in any Material transaction, or entered into any Material agreement
outside the ordinary course of business consistent with past practice; (iv) the
Company has not suffered any Material loss, damage, destruction, or other
casualty to any of its assets (whether or not covered by insurance); and (v) the
Company has not, in respect of its Business, taken any of the actions set forth
in Section 7.1(b) except as permitted thereunder. Without limiting the
generality of the foregoing, since September 29, 1996: (i) the Company has not
sold, leased, transferred, or assigned any Material portion of its assets,
tangible or intangible, other than for fair consideration in the ordinary course
of its business; (ii) the Company has not entered into any Contract, lease, sub-
lease, license or sub-license (or series of related contracts, leases, sub-
leases, license and sub-licenses) either involving more than $25,000.00 or other
than in the ordinary course of its business; (iii) no Person, including the
Company, has accelerated, terminated, modified or cancelled any Contract, lease,
sub-lease, license or sub-license (or series of related Contracts, leases, sub-
leases, licenses and sub-licenses) involving more than $25,000.00 to which the
Company is a party or by which it may be bound; (iv) the Company has not
permitted or allowed to be imposed upon any of its assets, tangible or
intangible, any Lien; (v) the Company has not made any capital expenditures (or
series of related capital expenditures) involving more than $100,000.00 in the
aggregate; (vi) the Company has not made any capital investment in, any loan to,
or any acquisition of, the securities or assets of any other Person (or series
of related capital investments, loans, or acquisitions); (vii) the Company has
not created, incurred, assumed or guaranteed any Indebtedness (including
capitalized lease obligations); (viii) the Company has not delayed or postponed
(beyond its normal practice) the payment of accounts payable and other
liabilities or obligations; (ix) the Company has not cancelled, compromised,
waived, or released any right or claim (or series of related rights or claims)
involving more than $25,000; (x) the Company has not declared, set aside or paid
any dividend or distribution with respect to any of its equity securities or
redeemed, purchased or otherwise acquired any of its equity securities; (xi) the
Company has not experienced any damage, destruction or loss (whether or not
covered by insurance) to any of its property exceeding $25,000.00 as to any one
occurrence or $100,000.00 in the aggregate; (xii) the Company has not made any
loan to, or entered into any transaction with, any of its Members, managers,
officers, or employees giving rise to any claim or right on its part against
such Person or on the part of such Person against it; (xiii) the Company has not
entered into any employment Contracts or collective bargaining agreements,
written or oral, or modified the terms of any existing such Contracts or
agreements; (xiv) the Company has not granted any increase in the base
compensation of any of its managers, officers or employees; (xv) the Company has
not adopted any bonus, profit-sharing, incentive compensation, pension,
retirement, medical, hospitalization, life or other insurance, severance or
other plan, Contract or commitment for any of its Members, managers, officers,
or employees or modified or terminated any existing such plan, Contract or
commitment; (xvi) the Company has not made any other change in employment terms
for any of its managers, officers or employees; (xvii) the Company has not
suffered any shortages of materials or supplies or any casualty that has had, or
will have, a Material Adverse Effect; (xviii) the Company has not made or
pledged to make any charitable or other capital contribution other than in the
ordinary course of business consistent with past business practices; (xix) there
has not been any other occurrence, event, incident, action, failure
19
to act or transaction outside the ordinary course of business involving the
Company; and (xx) the Company has not committed to any of the foregoing.
4.25 Litigation. Except as set forth on Schedule 4.25, there are no
----------
actions, causes of action, claims, suits, or Proceedings pending or, to the
Knowledge of the Company, threatened, against the Company or affecting the
operation by the Company of its business at law, in equity, or before or by any
Governmental Entity, which (i) seeks to restrain or enjoin the consummation of
the transactions contemplated hereby or (ii) if adversely determined, could
reasonably be expected to have a Material Adverse Effect. Except as set forth
in Schedule 4.25, the Company is not subject to, or in default with respect to,
any order, writ, injunction, or decree of any Governmental Entity.
4.26 Tax Matters.
-----------
(a) Tax Returns. All returns (including information returns) and
-----------
reports, including all schedules or attachments thereto, required by the United
States or any state or any political subdivision thereof or any foreign
jurisdiction to be filed by the Company or by any Affiliated, consolidated, or
combined group of legal entities of which the Company is a member, have been
timely filed (collectively, the "Tax Returns"). All information provided in
such Tax Returns is true, complete and accurate in all Material respects. All
Taxes owed by the Company by Law or pursuant to any Tax sharing agreement
(whether or not shown on any Tax Return and whether or not assessed) have been
paid or a full reserve has been made for such Taxes on the books and records of
the Company, including the Financial Statements. Except as set forth on
Schedule 4.26(a), the Company is not currently the beneficiary of any extension
of time within which to file any Tax Return. No claim with respect to the
Company has ever been made by an authority in a jurisdiction where the Company
or any of its subsidiaries do not file Tax Returns that they are or may be
subject to taxation by such jurisdiction. There is no Lien affecting any of the
Acquisition Assets that arose in connection with any failure or alleged failure
to pay any Tax.
(b) Payments. Except with respect to current non-delinquent amounts,
--------
the Company has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, Member or any other Person.
(c) Additional Taxes. The Company does not expect any Governmental
----------------
Entity to assess any amount of additional Taxes for any period for which Tax
Returns have been filed. There is no Material dispute or claim concerning any
Tax liability of the Company either claimed or raised by any authority in
writing or as to which the Company has Knowledge based upon direct inquiry by
any agent of such authority. Except as described in Schedule 4.26(c), no Tax
deficiency or delinquency has been asserted against the Company; there is no
unpaid assessment, proposal for additional Taxes, deficiency or delinquency in
the payment of any of the Taxes of the Company that, to the Knowledge of
Company, could be asserted by any
20
authority. Schedule 4.26(c) lists all federal and state income Tax returns of
the Company, and any consolidated, or combined group of legal entities of which
the Company is a member, for taxable periods ended on or after December 31,
1994, indicates those Tax returns that have been audited and indicates those Tax
Returns that currently are the subject of audit. Sellers have delivered to
Buyer correct and complete copies of all Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company, and any
consolidated, combined, or group of legal entities of which the Company is a
member for any taxable period ended on or after December 31, 1994. The Company
has not violated any federal, state, local or foreign Tax Law except where such
violation would not have a Material Adverse Effect on the property, Business or
financial condition of the Company.
(d) Waivers. Except as set forth on Schedule 4.26(d), no Person
-------
has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency affecting the
liability of the Company for Taxes.
(e) Tax Liability in Financial Statements. The liabilities for
-------------------------------------
Taxes (including deferred taxes) shown in the Financial Statements are and will
be adequate accruals and have been and will be accrued in a manner consistent
with the practices utilized for accruing Tax liabilities in the Company's most
recently completed Tax year.
(f) Safe Harbor Lease. None of the assets of the Company
-----------------
constitute property that the Company, or any Affiliate of the Company, will be
required to treat as being owned by another Person pursuant to the "Safe Harbor
Lease" provisions of Section 168(f)(8) of the Code prior to repeal by the Tax
Equity and Fiscal Responsibility Act of 1982.
(g) Tax Exempt Entity. None of the assets of the Company are
-----------------
or will be subject to a lease to a "Tax Exempt Entity" as such term is defined
in Section 168(h)(2) of the Code.
(h) Other Tax Matters. The Company has not filed a consent under
-----------------
Section 341(f) of the Code concerning collapsible corporations. The Company has
not made any payments, is not obligated to make any payments and is not a party
to any agreement that under certain circumstances could obligate it to make any
payments that would be disallowed under Section 280G of the Code. The Company
has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable periods specified
in Section 897(c)(1)(A)(ii) of the Code. The Company is not a foreign person as
such term is referred to in Section 1445(f)(3) of the Code. The Company does
not own any interests in any entity that is characterized as a partnership under
the Code. There are no outstanding requests for rulings with any taxing or
revenue authority that would effect the operations of the Company.
4.27 Product Liability. Except as disclosed in Schedule 4.27, (i)
-----------------
there is no notice, demand, claim, action, suit, inquiry, hearing, Proceeding,
notice of violation or investigation
21
of a civil, criminal or administrative nature by or before any Governmental
Entity against or involving any product, substance or material (collectively, a
"Product"), or claims or lawsuits by any Person involving the same or similar
Product manufactured, produced, distributed or sold by or on behalf of the
Company which is pending or, to the Knowledge of the Company, threatened,
resulting from a defect or alleged defect in design, manufacture, materials or
workmanship of any Product manufactured, produced, distributed or sold by or on
behalf of the Company, or any failure or alleged failure to warn, or from any
breach or alleged breach of implied warranties or representations, (ii) to the
Knowledge of the Company, for the past five (5) years, there has been no Basis
for any such claim, and (iii) there has not been, nor is there under
consideration or investigation by the Company, any Product recall, rework,
retrofit or post-sale warning (collectively, recalls, reworks, retrofits and
post-sale warnings are referred to in this Agreement as "Recalls") conducted by
or on behalf of the Company or any Recall conducted by or on behalf of any
entity as a result of any defect or alleged defect in any Product supplied by
the Company.
4.28 Product Warranty. Each Product manufactured, sold, leased or
----------------
delivered by the Company has been in conformity with all applicable contractual
commitments, all Applicable Laws, and all express and implied warranties, and
the Company has no liability (and there is no Basis) for any present or future
charge, complaint, action, suit, Proceeding, hearing, investigation, claim or
demand giving rise to any liability for replacement or repair thereof or other
damages in connection therewith, subject only to any reserve for product
warranty claims set forth on the Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with past customs and
practices of the Company. No Product manufactured, sold, leased or delivered by
the Company is subject to any guaranty, warranty or other indemnity beyond the
applicable standard terms and conditions of sale or purchase. Schedule 4.28
includes copies of the standard terms and conditions of sale or lease for the
Company as well as all applicable guaranty, warranty and indemnity provisions.
4.29 Compliance With Laws. Except as set forth on Schedule 4.29, the
--------------------
Company has complied in all Material respects with all Applicable Laws relating
to the ownership or operation of its assets and properties or the operation of
its business, except for noncompliance with such Applicable Laws which,
individually or in the aggregate, the Company does not expect, and would not
reasonably be expected, to have a Material Adverse Effect upon the business,
assets, or prospects of the Company's Business or any Material portion thereof,
and the Company has not received any written notice which has not been dismissed
or otherwise disposed of, that the Company has not so complied. The Company is
not charged or, to the Knowledge of the Company, threatened with, or, under
investigation with respect to, any violation of any Applicable Law relating to
any aspect of the ownership or operation of its assets or the operation of its
business. The Company has not made any illegal payment to officers or employees
of any Governmental Entity or to customers or suppliers, engaged in any other
illegal or reciprocal practices or illegally given any consideration to
purchasing agents or other representatives of customers with respect to sales
made or to be made by the Company, and no notification has been received by the
Company alleging any violation of any of the foregoing.
22
4.30 Affiliate Agreements. Except as set forth on Schedule 4.30,
--------------------
there are no Material written or oral Contracts between the Company and/or the
Company's Affiliates in connection with its business, including, without
limitation, any such Contracts relating to the provision of any services by the
Company to any such Affiliate, or by any such Affiliate to the Company. Other
than in the ordinary course of business and except as set forth on Schedule
4.30, since September 30, 1996 (a) there have been, (b) prior to the Closing
Date there will be, and (c) to the Knowledge of the Sellers after the Closing
Date there will be, no transactions, agreements or arrangements between the
Company and (i) any Affiliate of the Company, (ii) any director or officer of an
Affiliate, or (iii) any member of the immediate family of any individual
described in clause (i) or (ii) of this sentence.
4.31 Labor Relations.
---------------
(a) Except as set forth on Schedule 4.31(a), the Company is not a
party to any collective bargaining agreement. Except as set forth on Schedule
4.31, there are no controversies or unfair labor practice Proceedings pending
or, to the Knowledge of the Company, threatened between the Company and any of
its current or former employees or any labor or other collective bargaining unit
representing any current or former employee of the Company that could reasonably
be expected to result in a labor strike, dispute, slow-down or work stoppage or
otherwise have a Material Adverse Effect. Except as set forth on Schedule 4.31,
no organizational effort is presently being made or, to the Knowledge of the
Company, threatened by or on behalf of any labor union with respect to employees
of the Company. To the Knowledge of the Company, no executive, key employee or
group of employees of the Company has any plan to terminate employment with the
Company.
(b) The Company is in compliance in all material respects with all
Applicable Laws pertaining to employment and employment practices and wages,
hours, and other terms and conditions of employment in respect of the employees
of its business and is not, in respect of its business or the employees thereof,
engaged in any unfair labor practices or unlawful employment practices. There
is no pending or, to the Knowledge of the Company, threatened Proceeding by or
before, and the Company is not subject to any judgment, order, writ, injunction,
or decree of or inquiry from, the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Department of Labor, or any other
Governmental Entity in connection with any current, former, or prospective
employee of the Company's Business which could have a Material Adverse Effect on
the Company's Business.
(c) Other than as set forth on Schedule 4.31(c), during the three
years immediately preceding the date hereof, no employee or other Person has
filed a workers' compensation claim against the Company or has reported a work-
related injury or employment claim to the Company or to the Knowledge of
Sellers, to any other Person (whether or not a workers' compensation claim has
been made).
23
4.32 Environmental Matters. Except as set forth on Schedule 4.32 or
---------------------
as reflected on the Financial Statements: (i) the Company is in compliance in
all Material respects with all Environmental Laws in connection with the
ownership, use, maintenance and operation of its assets, pertaining to health,
safety, the environment, Hazardous Materials, and otherwise in connection with
the conduct of its business; (ii) the Company has no Material liability, whether
contingent or otherwise, under any Environmental Law with respect to its
operations or properties; (iii) no notices of violation or alleged violation of,
non-compliance or alleged non-compliance with or any liability under, any
Environmental Law relating to the operations or properties of the Company have
been received by the Company since December 2, 1994; (iv) there are no
administrative, civil or criminal writs, injunctions, decrees, orders, or
judgments outstanding, or any Proceedings pending or, to the Knowledge of the
Sellers and the officers and managers of the Company (and the employees of the
Company having responsibility for such matters), threatened, relating to
compliance with or liability under any Environmental Law affecting the Company
which matters, if decided adversely to the Company, could have a Material
Adverse Effect; (v) there are no underground storage tanks on any owned or
leased real property, or asbestos containing materials on or in the improvements
or fixtures located thereon; (vi) the Company has obtained or applied for all
Permits required under any Environmental Law for the conduct of its business or
related to any of its owned or leased real property, or improvements or
equipment located thereon; (vii) the Company has neither expressly nor by
operation of law, assumed or undertaken any liability, including without
limitation any obligation for Costs of Remediation of any other Person; (viii)
neither the Company, any officer or manager nor any employee of the Company
having responsibility for such matters has any Knowledge of any other Person who
has caused any Release or threatened Release of any Hazardous Material on or
from any owned or leased real property or any real property at or to which the
Company disposed, transported, treated or arranged to dispose of Hazardous
Materials prior to the Closing Date; and (ix) except as set forth on Schedule
4.32, the Company is not required to give notice of or record or deliver to any
Governmental Entity an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby. Schedule 4.32
describes each Permit in existence required of the Company with respect to its
Business by any Laws.
4.33 Legal Proceedings. There are no Proceedings pending or, to the
-----------------
best Knowledge of Sellers, threatened, seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
4.34 Brokerage Fees. Sellers have not retained any financial
--------------
advisor, broker, agent, or finder or paid or agreed to pay any financial
advisor, broker, agent, or finder on account of this Agreement or any
transaction contemplated hereby.
4.35 Capital. Except for the Operating Agreement of the Company, and
-------
except as set forth on Schedule 4.35, there are no outstanding subscriptions,
options, warrants, calls, demands or other Contracts of any kind or nature
whatsoever, under which any of Sellers is or may be obligated to sell or issue
to any Person any membership interests in the Company or any other
24
securities which are convertible into, or otherwise have a right to subscribe
for, any membership interests of the Company. All of the Members of the Company
are listed on Schedule 4.35. By executing this Agreement, the Members of the
Company hereby waive any of the foregoing rights they may have with respect to
any of the foregoing.
4.36 Subsidiaries. Except as set forth on Schedule 4.36, the Company
------------
does not control directly or indirectly, or have any direct or indirect equity
participation in or otherwise control, any Person.
4.37 Solvency. The Company is not now insolvent, and will not be
--------
rendered insolvent by any of the transactions contemplated by this Agreement.
In addition, immediately after giving effect to the consummation of the
transactions contemplated by this Agreement, (1) the Company will be able to pay
its debts as they become due, (2) the property of the Company does not and will
not constitute unreasonably small capital, and the Company will not have
unreasonably small capital and will not have insufficient capital with which to
conduct its present or proposed business, and (3) taking into account all
pending and threatened litigation, final judgments against the Company in
actions for money damages are not reasonably anticipated to be rendered at a
time when, or in amounts such that, the Company will be unable to satisfy any
such judgments promptly in accordance with their terms (taking into account the
maximum probable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) as well as all other
obligations of the Company. The cash available to the Company, after taking
into account all other anticipated uses of the cash of the Company, will be
sufficient to pay all such judgments promptly in accordance with their terms.
As used in this Section, (x) "insolvent" means, for any Person, that the sum of
the present fair saleable value of its assets does not and will not exceed its
debts and other probable liabilities, and (y) the term "debts" includes any
legal liability, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent, disputed or undisputed, secured or unsecured.
4.38 Disclosure. No representation or warranty made by Sellers in
----------
this Agreement, and no statement contained in any document, certificate, or
other writing furnished or to be furnished pursuant hereto or in connection
herewith, contains or will contain, at the time of delivery, any untrue
statement of a Material fact or omits or will omit, at the time of delivery, any
untrue statement of a Material fact or omits or will omit, at the time of
delivery, to state any Material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading. Sellers know of no matter which has not been disclosed to Buyer
pursuant to this Agreement which would reasonably be expected to affect
Materially and adversely, or, so far as Sellers can now reasonably foresee, will
Materially and adversely affect, the business, assets, results of operations,
condition (financial or otherwise), or prospects of the Company's Business or
the ownership or operation of the Acquisition Assets or any Material portion
thereof or the ability of Sellers to consummate the transactions contemplated
hereby.
25
4.39 Other Claims. There are no suits, claims, actions, Proceedings
------------
or investigations, whether actual, pending, asserted, or to the Knowledge of
Sellers, threatened, against or affecting the Company or its Business, or to
which the Company is or might become a party, which would or might have a
Material Adverse Effect upon any representation or warranty made by Sellers
herein. To the Knowledge of Sellers, there is no overtly threatened or pending
litigation, contractually assumed obligations or other unasserted possible
claims or assessments affecting or relating to the Company, its Business or the
Acquisition Assets except as set forth on Schedule 4.39.
4.40 Representations and Warranties on Closing Date. The representations
----------------------------------------------
and warranties made in this Article IV will be true and correct
on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except that any such representations and warranties which expressly relate only
to an earlier date shall be true and correct on the Closing Date as of such
earlier date.
ARTICLE V
Representations and Warranties of Buyer
---------------------------------------
Buyer represents and warrants to Sellers, that:
5.1. Organization; Authority. Buyer is a corporation duly organized,
-----------------------
validly existing and in good standing under the Laws of the state of Delaware
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
5.2. Qualification. Buyer is duly qualified to do business and is in
-------------
good standing in each jurisdiction identified on Schedule 5.2. Buyer is not
required to be qualified or licensed to do business in any other jurisdictions
where the failure to be so qualified or licensed would, individually or in the
aggregate, have a Material Adverse Effect.
5.3. Constituent Documents. Buyer has delivered to the Company
---------------------
accurate and complete copies of its Articles of Incorporation and Bylaws as
currently in effect.
5.4. Authority Relative to This Agreement.
------------------------------------
(a) Buyer has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement and each of the Ancillary
Agreements to which it is a party. The execution and delivery by Buyer of this
Agreement and each of the Ancillary Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary action on the part of Buyer.
26
(b) This Agreement upon its execution, and each of the Ancillary
Agreements to which Buyer is a party upon its execution will constitute, the
legal, valid and binding obligation of Buyer, enforceable in accordance with
their respective terms, except to the extent such enforcement may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium and similar
Laws affecting creditors' rights generally and (ii) equitable principals which
may limit the availability of certain equitable remedies (such as specific
performance) in certain instances. Except as described on Schedule 5.4(b)
hereto, the execution, delivery and performance by Buyer of this Agreement and
each of the Ancillary Agreements to which it is a party, and the consummation of
the transactions contemplated hereby and thereby, do not require the consent,
waiver, approval, license or authorization of any Person (except as already
obtained).
5.5. Non-Contravention. Except as set forth on Schedule 5.5, the
-----------------
execution, delivery, and performance by Buyer of this Agreement and each of the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with, or result in a violation of any provision of, the charter or bylaws of
Buyer, (ii) conflict with, or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
Contract, agreement, or other instrument or obligation to which Buyer is a party
or by which Buyer or its business or any of its owned or leased assets may be
bound, (iii) conflict with or result in a violation of any provision of any
shareholders' agreement, voting agreement, voting trust agreement, stock pledge
agreement, loan agreement or other Contract by which Buyer may be bound, (iv)
result in the creation or imposition of any Encumbrance upon any of the assets
of Buyer, or (v) assuming compliance with the matters referred to in Section
5.7, violate any Applicable Law binding upon Buyer.
5.6 Business Information. Buyer has delivered to the Company
--------------------
accurate and complete copies of the information with respect to Buyer described
on Schedule 5.6 (collectively the "Business Information"). As of the date
hereof, the information contained in the Business Information is true and
correct in all Material respects.
5.7 Governmental Approvals. Except for consents required under the
----------------------
HSR Act, no consent, approval, order, or authorization of, or declaration,
filing, or registration with, any Governmental Entity is required to be obtained
or made by Buyer in connection with the execution, delivery, or performance by
Buyer of this Agreement or any of the Ancillary Agreements to which it is a
party or the consummation by Buyer of any of the transactions contemplated
hereby or thereby, other than (i) as set forth on Schedule 5.7; and (ii) such
consents, approvals, orders, or authorizations which, if not obtained, and such
declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a Material Adverse Effect on the
business, assets, results of operations, condition (financial or
27
otherwise), or prospects of Buyer considered as a whole or on the ability of
Buyer to consummate the transactions contemplated hereby.
5.8 Legal Proceedings. There are no Proceedings pending or, to the
-----------------
best Knowledge of Buyer, threatened, seeking to restrain, prohibit, or obtain
damages or other relief in connection with or which would have a Material
Adverse Effect on this Agreement or the transactions contemplated hereby.
5.9 Brokerage Fees. Except as set forth on Schedule 5.9, neither
--------------
Buyer nor any of its Affiliates has retained any financial advisor, broker,
agent, or finder or paid or agreed to pay any financial advisor, broker, agent,
or finder on account of this Agreement or any transaction contemplated hereby.
5.10 Financing. At Closing, Buyer will have
---------
sufficient funds available to make the payments set forth in Section 3.1.
ARTICLE VI
Consents; Regulatory Matters and Approvals
------------------------------------------
6.1. Consents. This Agreement has been signed by all of the Members
--------
of the Company. Each of the Members of the Company covenants and agrees that he
(i) has reviewed and approved this Agreement and the Ancillary Agreements, (ii)
will vote in favor of the adoption of this Agreement and the Ancillary
Agreements and consummation of the transactions contemplated hereby and thereby
and, (iii) at or prior to the Closing, will execute such of the Ancillary
Agreements to which he is a party.
6.2. Approvals. Each of the parties hereto will give notices to,
---------
make any filings with, and use their respective reasonable best efforts to
obtain any authorizations, consents or approvals of, all appropriate Persons and
Governmental Entities in connection with the matters referred to in Sections
4.6, 5.7 and 8.11. Without limiting the generality of the foregoing:
(a) Each Manager of the Company, as evidenced by the execution of this
Agreement, covenants and agrees that he will not vote at any meeting of the
Managers of the Company to condition the submission to the Members of the
Company of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated hereby and thereby on any basis which will
require, under any Applicable Laws, more than the minimum number of all the
votes entitled to be cast on the question of whether to approve such matters.
(b) The parties will comply with the provisions of Section 8.11 in
order to satisfy the provisions of the HSR Act.
28
ARTICLE VII
Conduct of Business Pending Closing
-----------------------------------
Sellers covenant and agree, severally, and not jointly and severally,
with Buyer, as follows:
7.1 Conduct of Company.
------------------
(a) Conduct and Preservation of Business. Except as contemplated by
------------------------------------
this Agreement, during the period from the date hereof to the Closing, Company
shall (i) conduct its business only in the ordinary course consistent with past
practice; (ii) shall use its reasonable best efforts to preserve, maintain, and
protect its assets and Company's Business; (iii) shall use its reasonable best
efforts to preserve intact the business organization of Company's Business, to
keep available the services of the employees of its business, and to maintain
existing relationships with licensors, licensees, suppliers, contractors,
distributors, customers, and others having business relationships with its
business; and (iv) comply with all Applicable Laws.
(b) Restrictions on Certain Actions. Without limiting the generality
-------------------------------
of the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Closing, Company shall not, without the prior written consent of
Buyer (which consent will not be unreasonably withheld):
(i) make any Material change in the ongoing operations of
Company's Business;
(ii) except in the ordinary course of business consistent with
past practice with respect to the purchase of inventory (including raw
materials), create, incur, guarantee, or assume any Indebtedness for borrowed
money in respect of Company's Business;
(iii) mortgage or pledge any of its assets or create or suffer
to exist any Encumbrance thereupon;
(iv)(a) enter into, adopt, or (except as may be required by
Applicable Law) amend any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock, stock
purchase, pension, retirement, deferred compensation, employment, severance, or
other Employee Benefit Plan, trust, fund, or other arrangement for the benefit
or welfare of any employee of Company's Business; (b) except for normal
increases in the ordinary course of business consistent with past practice that,
in the aggregate, do not result in a Material increase in benefits or
compensation expense to Company, increase in any manner the compensation or
fringe benefits of any employee of Company's Business; (c) pay to any employee
of Company any benefit not required by any Employee Benefit Plan, trust,
29
fund, or other arrangement as in effect on the date hereof; (d) pay any bonus to
any employee of Company except for bonuses paid in the ordinary course of
business and consistent with past practice; (e) declare, set aside or pay any
dividend or distribution with respect to its membership interests, except for
distributions in amounts calculated to enable the Members to pay their
respective federal, state and local income Taxes (at applicable rates) due with
respect to the Company's current earnings (the "Tax Distributions") as
contemplated by Section 3.2, or redeem, repurchase, or otherwise acquire any of
its membership interests; or (f) offer, sell, issue or commit to issue any of
Company's membership interests or any options, warranties, rights or other
securities convertible into or having a right to acquire any of same.
(v) sell, lease, transfer, or otherwise dispose of, directly
or indirectly, any of its assets, other than inventory and unusable equipment
sold in the ordinary course of business consistent with past practice;
(vi) make any capital expenditure or expenditures relating to
Company's Business which is in excess of $25,000.00 as to any one item or
$50,000.00 in the aggregate;
(vii) pay, discharge, or satisfy any claims, liabilities, or
obligations relating to Company's Business (whether accrued, absolute,
contingent, unliquidated, or otherwise, and whether asserted or unasserted),
other than the payment, discharge, or satisfaction in the ordinary course of
business consistent with past practice, or in accordance with their terms, of
liabilities reflected or reserved against in the Financial Statements or
incurred since the latest of the Financial Statements in the ordinary course of
business consistent with past practice;
(viii) enter into any lease, Contract, agreement, commitment,
arrangement, or transaction relating to Company's Business, except in the
ordinary course of business consistent with past practice;
(ix) amend, modify, or change any existing lease, Contract, or
agreement relating to Company's Business, other than in the ordinary course of
business consistent with past practice;
(x) waive, release, grant, or transfer any rights of value
relating to Company's Business, other than in the ordinary course of business
consistent with past practice;
(xi) allow the levels of raw materials, work-in-progress,
finished goods, supplies, and other materials included in the inventory of
Company's Business to vary in any Material respect from the levels customarily
maintained by Company in the ordinary course of business consistent with past
practice;
(xii) permit any current insurance or reinsurance policy to be
cancelled or terminated or any of the coverages thereunder to lapse if such
policy covers assets or insures
30
risks, contingencies, or liabilities of Company's Business, unless
simultaneously with such cancellation, termination, or lapse, replacement
policies providing coverage equal to or greater than the coverage cancelled,
terminated, or lapsed are in full force and effect and written copies thereof
have been provided to Company;
(xiii) change any of the accounting principles or practices used
by it relating to Company's Business, except for any change required by reason
of a concurrent change in GAAP and notice of which is given in writing by
Company to Buyer; or
(xiv) engage in any transactions not contemplated by this
Agreement, incur any Material liabilities or incur any obligations except (i)
those in connection with its performance of the transactions provided for
herein, or (ii) those which are in the ordinary course of business and
consistent with past practices.
(xv) enter into any Contract to acquire all or substantially
all of the assets or properties of any other Person or acquire all or
substantially all of the securities of any other Person; or
(xvi) effect any change in the Articles of Organization or
Operating Agreement of Company; or
(xvii) authorize or propose, or agree in writing or otherwise to
take, any of the actions described in this Section.
ARTICLE VIII
Additional Agreements
---------------------
8.1 Access to Information; Confidentiality.
--------------------------------------
(a) Between the date hereof and the Closing, Company (i) shall give
Buyer and its authorized representatives reasonable access to all of Company's
employees, all offices, warehouses, and other facilities, and all books and
records relating to its businesses, (ii) shall permit Buyer and its authorized
representatives to make such inspections as they may reasonably require, and
(iii) shall cause its officers to furnish Buyer and its authorized
representatives with such financial and operating data and other information
with respect to the Business as they may from time to time reasonably request;
provided, however, that no investigation pursuant to this Section shall affect
any representation or warranty of Sellers contained in this Agreement or in any
agreement, schedule, instrument, or document delivered pursuant hereto or in
connection herewith. Each party shall hold in confidence all information
provided to the other on the terms and subject to the conditions contained in
any Confidentiality Agreements or similar agreements heretofore entered into
between the parties (collectively the "Confidentiality Agreements").
31
(b) Buyer acknowledges and agrees that irreparable damage would occur
in the event any confidential information regarding the Intellectual Property,
Company or Company's Business (collectively the "Confidential Information") were
disclosed to or utilized on behalf of any Person which is in competition with
Company. Accordingly, Buyer covenants and agrees that it will not, directly or
indirectly, without the prior written consent of the Company, disclose any of
such Confidential Information from and after the date hereof to any Person,
except to its authorized representatives; provided, however, that Confidential
Information shall not be deemed to include information which (i) was or becomes
generally available to the public other than as a result of an unauthorized
disclosure, or (ii) was or becomes available on a nonconfidential basis from a
source other than the recipient of such information, provided that such source
is not known by the provider of such information to be bound by a
confidentiality agreement with respect to such Confidential Information.
Notwithstanding the foregoing provisions of this paragraph, Buyer and its
Affiliates may disclose any Confidential Information to the extent that, in the
opinion of its counsel, such person is legally compelled to do so, provided
that, prior to making such disclosure, such person advises and consults with the
other party regarding such disclosure and provided further that such person
discloses only that portion of such Confidential Information as is legally
required.
8.2 Acquisition Proposals. Unless this Agreement shall have been
---------------------
terminated in accordance with Section 11.1, neither Company, any Members,
manager, officer, employee, or representative of Company or any of Company's
Affiliates shall, directly or indirectly, (i) solicit, initiate, or knowingly
encourage any Acquisition Proposal, or (ii) engage in discussions or
negotiations with any Person that is considering making or has made an
Acquisition Proposal. Sellers shall immediately cease and cause to be
terminated any existing activities, discussions, or negotiations with any
Persons conducted heretofore with respect to any Acquisition Proposal and shall
promptly request each such Person who has heretofore entered into a
confidentiality agreement in connection with an Acquisition Proposal to return
to the Company all Confidential Information heretofore furnished to such Person
by or on behalf of the Company. The term "Acquisition Proposal", as used in
this Section, means any offer or proposal for, or any indication of interest in,
the acquisition of all or substantially all of the assets of the Company or all
or substantially all of the equity securities of the Company, other than the
transactions contemplated or expressly permitted by this Agreement.
8.3 Third Party Consents. Company and Buyer shall use their reasonable
--------------------
best efforts to obtain all consents, approvals, orders, authorizations, and
waivers of, and to effect all declarations, filings, and registrations with, all
third parties (including Governmental Entities) that are necessary, required or
deemed by Company or Buyer to be desirable to enable consummation of the
transactions as contemplated by this Agreement.
8.4 Employment Agreements.
---------------------
(a) Buyer shall enter into an employment agreement (the "Employment
Agreement") at (and subject to the occurrence of) the Closing with each of the
persons identified
32
on Schedule 8.4(a) pursuant to which Buyer shall agree to employ each of such
persons for the period and on the terms set forth therein. The Employment
Agreement shall be substantially in the form of Exhibit E attached hereto.
(b) Buyer shall enter into an employment agreement (the "Employment
Agreement") at (and subject to the occurrence of) the Closing with each of the
persons identified on Schedule 8.4(b) pursuant to which Buyer shall agree to
employ each of such persons for the period and on the terms set forth therein.
The Employment Agreement shall be substantially in the form of Exhibit F
attached hereto.
8.5 Non-Competition Agreements.
--------------------------
(a) Each of the persons identified on Schedule 8.5(a) shall enter into
a non-competition agreement (the "Non-Compete Agreement") with Buyer at (and
subject to the occurrence of) the Closing. The Non-Compete Agreement shall be
in substantially the form of Exhibit G attached hereto.
(b) Each of the persons identified on Schedule 8.5(b) shall enter into
a non-competition agreement (the "Non-Compete Agreement") with Buyer at (and
subject to the occurrence of) the Closing. The Non-Compete Agreement shall be
in substantially the form of Exhibit H attached hereto.
(c) The Company and the other persons identified on Schedule 8.5(c)
shall enter into a non-competition agreement (the "Non-Compete Agreement") with
Buyer at (and subject to the occurrence of) the Closing. The Non-Compete
Agreement shall be in substantially the form of Exhibit I attached hereto.
8.6 Public Announcements. Without the written consent of Company and
--------------------
Buyer, Buyer and Company shall consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement
or the transactions contemplated hereby, and shall not issue any such press
release or make any such public statement with respect thereto.
8.7 Notification of Certain Matters. Sellers shall give prompt
-------------------------------
notice to Buyer of (i) the occurrence or nonoccurrence of any event, the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty of such party contained in Article IV to be untrue or inaccurate in
any Material respect at or prior to the Closing and (ii) any failure of Company
to comply with or satisfy any covenant, condition, or agreement to be complied
with or satisfied by Company hereunder. Buyer shall give prompt notice to
Company of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in Article V to be untrue or inaccurate in any Material respect at or
prior to the Closing and (ii) any failure of Buyer to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by Buyer
33
hereunder. The delivery of any notice pursuant to this Section shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, (ii) modify the conditions set forth in Articles IX and
X, or (iii) limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
8.8 Amendment of Schedules. Each party hereto agrees that, with respect to
----------------------
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to supplement
or amend promptly the Schedules hereto with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Schedules.
8.9 Fees and Expenses. Except as otherwise provided for herein, Buyer and
-----------------
Sellers shall each be responsible for their own fees and expenses incurred in
connection with the transactions contemplated by this Agreement.
8.10 Survival of Covenants. Except for any covenant or agreement which by
---------------------
its terms expressly terminates as of a specific date, the representations,
warranties, covenants and agreements of the parties hereto contained in this
Agreement shall survive the Closing without contractual limitation until the
Survival Date as provided in Section 12.1 hereof.
8.11 Xxxx-Xxxxx-Xxxxxx. As promptly as practicable, and in any event
-----------------
within ten (10) Business Days following the execution and delivery of this
Agreement by the parties, Company and the Buyer shall each prepare and file, or
shall cause its "ultimate parent" (as defined in the HSR Act) to prepare and
file, any required notification and report form under the HSR Act, in connection
with the transactions contemplated hereby, the filing fees for which shall be
borne by Buyer; Company and Buyer shall, or shall cause their ultimate parents
to, request early termination of the waiting period thereunder; and Company and
Buyer shall, or shall cause their ultimate parents to, respond with reasonable
diligence to any request for additional information made in response to such
filings. As promptly as practicable, and in any event within ten (10) Business
Days, following the execution and delivery of this Agreement by the parties,
Company and Buyer shall prepare and file any other application, report, or other
filing required to be submitted to any other governmental authority in
connection with the transactions contemplated hereby.
8.12 Best Efforts. Upon the terms and subject to the conditions of this
------------
Agreement, each of the parties hereto will use commercially reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper, or advisable consistent with Applicable Law to
consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.
8.13 Sellers' Agent. T. Xxxxxx Xxxxxxx shall act as agent ("Sellers'
--------------
Agent") for the Sellers for purposes of this Agreement and shall act and perform
such duties in accordance with
34
the terms of this Agreement. Sellers' Agent shall have the exclusive right and
power to represent, act on behalf of, waive or modify and negotiate settlements
of all matters on behalf of Sellers which may arise before or after the Closing
Date in connection with the transactions contemplated by this Agreement. Sellers
shall be bound by any such settlements, representations, actions, waivers or
modifications, or other matters agreed to by Sellers' Agent. Delivery or
disclosure to Sellers' Agent of any documents, reports, information, notices or
communications permitted or required to be furnished to Sellers pursuant to this
Agreement shall be deemed for all purposes of this Agreement to have been, or to
be furnished to all of Sellers by delivery to Sellers' Agent. Buyer shall have
no obligation to question the authority of Sellers' Agent and shall have no
liability to any Sellers or Sellers' Agent for any action taken in good faith in
reliance on or in accordance with written instructions from Sellers' Agent. In
the event the original Sellers' Agent named herein shall resign, die, or be
unable to act or continue to act or refuse to act as Sellers' Agent, a majority
of Members (determined by ownership of membership interests of Company) or their
successors, assigns, or personal representatives shall designate a successor to
serve as Sellers' Agent. The successor Sellers' Agent shall have all of the
rights and powers as the Sellers' Agent herein conferred upon the original
Sellers' Agent. It is specifically agreed that Buyer shall only be required to
deal with Sellers' Agent and not with any of the Sellers individually.
Specifically, but without limiting the generality of the foregoing, Buyer shall
not be required to furnish any reports or information to, give any notices to,
or obtain any consents from, any Sellers. In addition, except to the extent that
Sellers' Agent is prevented or prohibited from doing so and except as otherwise
provided herein, only Sellers' Agent shall have the right or power to exercise
any of the rights or remedies provided for herein or in any of the Ancillary
Agreements which may be exercised or undertaken by Sellers. Accordingly, no
Seller shall be entitled to exercise any rights or remedies unless and to the
extent that Sellers' Agent is prevented or prohibited from doing so. Buyer may
rely and shall be protected in acting or refraining from acting upon any
certificate, statement, notice, request, direction or consent received by Buyer
from Sellers' Agent, and Buyer shall have no duty or obligation to determine
whether any Seller or other person has consented to any such communication to
Buyer from Sellers' Agent.
8.14 Change of Name. Prior to or concurrently with Closing, the Company
--------------
shall (i) change its name to a name which is not the same as or deceptively
similar to Consolidated Forest Products, and (ii) file in all appropriate
jurisdiction, withdrawals of any certificates of authority to do business
therein as a foreign legal entity.
8.15 401(k) Plans. Notwithstanding anything in this Agreement to the
------------
contrary, Sellers shall cause the Company to adopt corporate resolutions and
take other actions required by the Company's 401(k) plan to terminate such plan
before the Closing Date. Sellers shall provide copies of such resolutions and
other documents (if any) to Buyer at the Closing. Promptly after the Closing
Date, Sellers or the Company shall undertake all actions required by the
Company's 401(k) plan in furtherance of the termination of such plan. Sellers or
the Company shall apply to the Internal Revenue Service for a favorable
determination letter that the termination of the Company's 401(k) plan in
connection with the transaction described in this Agreement does not
35
adversely affect the tax qualification of the Company's 401(k) plan. Sellers or
the Company shall disclose in the determination letter application all pertinent
facts concerning the coverage of the Company's employees under the Company's
401(k) plan through the plan termination date (which plan termination date shall
precede the Closing Date) and the coverage of the Company's employees under
Buyer's 401(k) plan on and after the Closing Date. Employees of the Company who
are employed on or after the Closing Date by Buyer shall be eligible to
participate in the Kevco, Inc. 401(k) Profit Sharing Plan (in which Buyer shall
become a participating employer with respect to Buyer's eligible employees) as
of the first plan entry date following each such person's attainment of age 21
and completion of 1 year of eligibility service. Sellers or the Company shall
make such amendments and take such other actions with respect to the Company's
401(k) plan as may be required by the Internal Revenue Service as a condition to
the issuance of a favorable determination letter. Sellers or the Company shall
notify Buyer promptly upon receipt by Sellers or the Company of any
determination made by the Internal Revenue Service with respect to the Company's
401(k) plan. Promptly after receipt of a favorable determination letter from
the Internal Revenue Service with respect to the termination of the Company's
401(k) plan, Sellers or the Company shall cause the Company's 401(k) plan to
distribute all plan assets in satisfaction of all plan benefit liabilities.
Buyer's 401(k) plan shall accept participant-directed rollover contributions
from the Company's 401(k) plan in accordance with the terms of Buyer's 401(k)
plan if the Internal Revenue Service issues a favorable determination letter
with respect to the termination of the Company's 401(k) plan. Sellers or the
Company shall pay all costs, expenses, taxes and other amounts in connection
with the Company's 401(k) plan. Buyer shall have no obligation to pay such
amounts. Sellers or the Company shall be responsible for all administration,
compliance and reporting in connection with the Company's 401(k) plan. Buyer
shall have no responsibility with respect to such actions.
ARTICLE IX
Conditions to Obligations of Sellers to Close
---------------------------------------------
The obligations of Sellers to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
9.1 Consents and Approvals. Buyer shall have satisfied the requirements
----------------------
of Section 6.2(b).
9.2 Representations and Warranties True. All the representations and
-----------------------------------
warranties of Buyer contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct on and as of the Closing
Date as if made on and as of such date, except as affected by transactions
contemplated or permitted by this Agreement and except to the extent that any
such representation or warranty is made as of a specified date, in which case
such representation or warranty shall have been true and correct as of such
specified date.
36
9.3 Covenants and Agreements Performed. Buyer shall have performed and
----------------------------------
complied with in all Material respects all covenants and agreements required
by this Agreement to be performed or complied with by it or prior to the Closing
Date, including without limitation, delivery to Sellers of the Cash Portion of
the Purchase Price and the Ancillary Agreements to which it is a party.
9.4 Certificate. Company shall have received a certificate executed by
-----------
the Chairman of the Board of Buyer, dated the Closing Date, representing and
certifying, in such detail as Company may reasonably request, that the
conditions set forth in Sections 9.2 and 9.3 have been fulfilled and that Buyer
has not breached any provisions of this Agreement.
9.5 Opinion of Counsel. Sellers shall have received an opinion of Xxxxxxx
------------------
& Xxxxxx, L.L.P., legal counsel to Buyer, dated the Closing Date, in form and
substance satisfactory to Sellers and their counsel. In rendering such opinion,
such counsel may rely as to factual matters upon certificates or other documents
furnished by directors and officers of Buyer and by government officials and
upon such other documents and data as such counsel deems appropriate as a basis
for such opinion.
9.6 Legal Proceedings. No Proceeding shall, on the Closing Date, be
-----------------
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
9.7 Xxxx-Xxxxx-Xxxxxx. All applicable waiting periods (and any extensions
-----------------
thereof) under the HSR Act shall have expired or otherwise been terminated
without objection from any of the relevant federal authorities.
9.8 No Material Adverse Change. There shall not have been any Material
--------------------------
adverse change in the business, assets, results of operations, condition
(financial or otherwise) or prospects of Buyer's Business, or any Material
portion thereof.
9.9 Consents; Estoppel Certificates. All consents and approvals of third
-------------------------------
parties (including Governmental Entities) required to be obtained by or on the
part of the parties hereto or otherwise reasonably necessary for consummation of
the transactions contemplated hereby shall have been obtained, and all thereof
shall be in full force and effect at the time of Closing.
9.10 Other Documents. Each of the certificates, instruments, documents and
---------------
payments listed below shall have been received by Company or other indicated
recipient:
(a) A copy of the resolutions of the Boards of Directors of Buyer
authorizing the execution, delivery, and performance by Buyer of this Agreement,
and the Ancillary Agreements to which it is a party, as well as the transactions
contemplated hereby, certified by the secretary or an assistant secretary of
Buyer.
37
(b) Executed copies of all consents and approvals of third parties
required to be obtained by Buyer for the consummation of the transactions
contemplated hereby.
(c) Certificates from the Secretary of State of Delaware, each dated
not more than 15 Business Days prior to the Closing Date, as to the legal
existence and good standing of Buyer under the Laws of such state.
(d) Such other certificates, instruments, and documents as may be
reasonably requested by Company to carry out the intent and purposes of this
Agreement.
9.11 Approval of Counsel to Company. All legal matters in connection with
------------------------------
the consummation of the transactions contemplated hereby and all agreements,
instruments, and documents delivered in connection therewith shall be reasonably
satisfactory in form and substance to Xxxxxxx and Xxxxxxx, legal counsel to
Company.
ARTICLE X
Conditions to Obligations of Buyer to Close
-------------------------------------------
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
10.1 Consents and Approvals. Sellers shall have satisfied the
----------------------
requirements of Sections 6.1, 6.2(a) and 6.2(b) hereof.
10.2 Representations and Warranties True. All the representations and
-----------------------------------
warranties of Sellers contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct on and as of the Closing
Date as if made on and as of such date, except as affected by transactions
contemplated or permitted by this Agreement and except to the extent that any
such representation or warranty is made as of a specified date, in which case,
such representation or warranty shall have been true and correct as of such
specified date.
10.3 Covenants and Agreements Performed. Sellers shall have performed and
----------------------------------
complied with in all Material respects all covenants and agreements required by
this Agreement to be performed or complied with by it or them on or prior to the
Closing Date, including without limitations, delivery to Buyer of the Ancillary
Agreements to which any of Sellers is a party.
10.4 Certificate. Buyer shall have received a certificate executed by
-----------
O'Xxxx Xxxxxx and T. Xxxxxx Xxxxxxx, dated the Closing Date, representing and
certifying, in such detail as Buyer may reasonably request, that the conditions
set forth in Sections 10.2 and 10.3 have been fulfilled and that none of Sellers
is in breach of any provision of this Agreement.
38
10.5 Opinion of Counsel. Buyer shall have received an opinion of Xxxxxxx &
------------------
Xxxxxxx, L.L.C., legal counsel to Sellers, dated the Closing Date, in form and
substance satisfactory to Buyer and its counsel. In rendering such opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by managers and officers of Company and by government officials and
upon such other documents and data as such counsel deems appropriate as a basis
for such opinion. To the extent the foregoing opinion concerns the Laws of any
jurisdiction other than Alabama, such counsel may rely upon the opinion of legal
counsel, who shall be reasonably satisfactory to Buyer, admitted to practice in
such other jurisdiction. Any opinion relied upon by such counsel, which shall be
in form and substance reasonably satisfactory to Buyer, shall be delivered
together with the opinion of such counsel, which shall state that such counsel
believes that its reliance thereon is justified.
10.6 Legal Proceedings. No Proceeding shall, on the Closing Date, be
-----------------
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
10.7 Xxxx-Xxxxx-Xxxxxx. All applicable waiting periods (and any
-----------------
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated without objection of any of the relevant federal authorities.
10.8 No Material Adverse Change. Since the later of the date of the
--------------------------
Unaudited Financial Statements or, if applicable, the Supplementary Unaudited
Financial Statements, there shall not have been any Material adverse change in
the business, assets, results of operations, condition (financial or otherwise),
or prospects of Company's Business or any Material portion thereof.
10.9 Consents; Estoppel Certificates. All consents and approvals of third
-------------------------------
parties (including Governmental Entities) required to be obtained by or on the
part of the parties hereto or otherwise reasonably necessary for the
consummation of the transactions contemplated hereby shall have been obtained,
and all thereof shall be in full force and effect at the time of Closing.
10.10 Other Documents. Buyer shall have received the certificates,
---------------
instruments, documents and other items listed below:
(a) A copy of the resolutions of the managers of Company and its
members authorizing the execution, delivery and performance by Company of this
Agreement and the Ancillary Agreements, as well as the transactions contemplated
thereby, certified by the secretary or an assistant secretary of Company.
(b) Executed copies of all consents and approvals of third parties
required to be obtained by or on the part of Company for the consummation of the
transactions contemplated hereby.
39
(c) Certificates from the appropriate governmental officials of the
State of Alabama, each dated not more than fifteen (15) Business Days prior to
the Closing Date, as to the legal existence and good standing of Company under
the Laws of such state.
(d) Certificates from the appropriate governmental officials of the
states listed on Schedule 3.2 as to the due qualification or licensing of
Company to do business in such states, dated not more than fifteen (15) Business
Days prior to the Closing Date.
(e) Such other certificates, instruments, and documents as may be
reasonably requested by Buyer to carry out the intent and purposes of this
Agreement.
(f) Evidence satisfactory to Buyer that all Contracts, whether
written or oral, between the Company and its Affiliates with respect to the
Caney Creek operations have been terminated and are of no further force or
effect in consideration for the payment by Buyer to the Company of $870,000 in
cash at Closing. Upon receipt, such amount shall be paid by the Company to Caney
Creek's principals, evidence of which shall be provided to Buyer.
10.11 Approval of Counsel to Buyer. All legal matters in connection with
----------------------------
the consummation of the transactions contemplated hereby and all agreements,
instruments, and documents delivered in connection therewith shall be reasonably
satisfactory in form and substance to Xxxxxxx & Xxxxxx, L.L.P., legal counsel to
Buyer.
ARTICLE XI
Termination, Amendment and Waiver
---------------------------------
11.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby abandoned at any time prior to the Closing in the following
manner:
(a) by mutual written consent of Sellers and Buyer; or
(b) either by Sellers or by Buyer, if the Closing Date shall not have
occurred on or before February 28, 1997 (the "Cut-Off Date") unless such failure
to close shall (i) be due to a breach of this Agreement by the party or parties
seeking to terminate this Agreement pursuant to this clause (b), or (ii) through
no fault of the parties hereto, be due to the failure to obtain the governmental
approvals contemplated by Sections 5.7 and 8.11 of this Agreement; or
(c) either by Sellers or by Buyer, if there shall be any statute,
rule, or regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or a Governmental Entity shall have
issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of
40
the transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and nonappealable.
11.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 11.1 by Sellers or by Buyer, written notice
thereof shall forthwith be given to the other party specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
become void and have no effect, except that the Confidentiality Agreements, the
agreements contained in this Section, Section 8.9, Article XII and Article XIV
shall survive the termination hereof. Nothing contained in this Section shall
relieve any party from liability for Damages actually incurred as a result of
any breach, non-observance or non-performance of this Agreement, including but
without limitation, payment of the non-defaulting party's fees and expenses
(including legal fees and expenses).
11.3 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed by or on behalf of all the parties hereto.
11.4 Waiver. Sellers, on the one hand, and Buyer, on the other hand,
------
may (i) waive any inaccuracies in the representations and warranties of the
other party or parties contained herein or in any document, certificate, or
writing delivered pursuant hereto or (ii) waive compliance by the other party or
parties with any of the other party's or parties' agreements or fulfillment of
any conditions to its or their own obligations contained herein. Any agreement
on the part of a party hereto to any such waiver shall be valid only if set
forth in an instrument in writing signed by or on behalf of such party. No
failure or delay by a party hereto in exercising any right, power, or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege.
11.5 Remedies Not Exclusive. The rights and remedies herein provided
----------------------
shall be cumulative and not exclusive of any rights or remedies provided by Law.
The rights and remedies of any party based upon, arising out of, or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant, or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence, or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant, or agreement contained
in this Agreement (or in any other agreement between the parties as to which
there is no inaccuracy or breach).
ARTICLE XII
Survival of Representations; Indemnification
--------------------------------------------
12.1 Survival. All representations and warranties, covenants and
--------
agreements of the parties hereto contained in this Agreement, in any of the
Ancillary Agreements or in any certificates, instruments or documents delivered
pursuant hereto or thereto shall survive the
41
Closing, and continue in full force and effect until the 3rd anniversary of the
Closing Date or the later termination date thereof in accordance therewith (the
"Survival Date"), regardless of any investigation or "due diligence" performed
or made by or on behalf of any Indemnified Party prior to the Closing Date.
From and after the Survival Date, no party hereto shall be under any liability
whatsoever pursuant to this Article XII with respect to any matter for which
indemnification may be sought, except with respect to matters for which notice
has been received in accordance with the provisions of this Article XII. No
party hereto shall have any indemnification obligation pursuant to this Article
XII with respect to any matter for which indemnification may be sought unless
before the applicable Survival Date, it (the "Indemnifying Party") shall have
received from the party seeking indemnification (an "Indemnified Party") written
notice as to the matter or matters for which indemnification is sought. The
notice (a "Notice of Claim") to be provided by the Indemnified Party to the
Indemnifying Party shall be provided promptly and in any event, within thirty
(30) calendar days after receiving any written notice from a third party;
provided, that no delay on the part of the Indemnified Party in notifying the
Indemnifying Party will relieve the Indemnifying Party from any obligation
hereunder unless, and then solely to the extent that, the Indemnifying Party is
Materially prejudiced thereby. Any Knowledge of any Manager, Member, employee
or agent of the Company shall not be imputed to Buyer.
12.2 Indemnification by Sellers.
--------------------------
(a) Subject to the terms and provisions of this Article XII,
Sellers shall, severally and not jointly and severally, defend, indemnify and
hold Buyer, its Affiliates and its and their respective officers, directors,
shareholders, employees and agents and its and their respective successors,
assigns, heirs, executors, administrators, receivers, trustees and other legal
representatives (collectively the "Buyer Group") harmless at all times from and
after the Closing Date immediately on demand from, against and in respect of,
and shall reimburse the Buyer Group for, any Damages incurred, sustained,
suffered by or resulting to the Buyer Group, or any of them, arising out of,
resulting from, incurred in connection with, or sustained as a result of:
(i) any inaccurate representation made by or on behalf of
any of Sellers in or pursuant to this Agreement, any Ancillary Agreement or any
certificate, instrument or document delivered pursuant hereto or thereto; or
(ii) any breach of any warranty made by or on behalf of any
of Sellers in or pursuant to this Agreement, any Ancillary Agreement, or any
certificate, instrument or document delivered pursuant hereto or thereto; or
(iii) any breach, default, nonfulfillment, nonperformance or
nonobservance by any of Sellers in the performance, fulfillment, or observance
of any of the obligations, covenants or agreements which are to be performed,
fulfilled or observed by or on behalf of any of Sellers in or pursuant to this
Agreement, any of the Ancillary Agreements or
42
any certificates, instruments or documents delivered pursuant hereto or thereto;
and including any failure to pay or discharge any of the Retained Liabilities;
or
(iv) any breach or violation of any agreement, Contract or
understanding between a third party and any of Sellers or any of their agents or
Affiliates, or a breach of any fiduciary or other duty owed to such third party
by any of Sellers or any of their agents or Affiliates; or
(v) any products shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date; or
(vi) any other actions, inactions, deeds or courses of
conduct of any of Sellers or any other Persons acting on their behalf.
(b) In addition to the provisions of Section 12.2(a), Sellers,
severally and not jointly and severally, will defend, indemnify and hold
harmless the Buyer Group, and each of them, and will reimburse the Buyer Group,
and each of them, for any Damages (including Costs of Remediation and other
costs of cleanup and containment) arising from or in connection with any
environmental, health, and safety liabilities arising out of or relating to:
(1) the ownership, operation, or condition at any time on or prior to the
Closing Date of the Owned Real Property or Leased Property (the "Facilities") or
the Acquisition Assets, or (2) any Hazardous Materials or other contaminants
that were present therein or thereon at any time on or prior to the Closing
Date.
(c) Each of the Members shall be severally liable for his pro
rata portion of any Damages of the Buyer Group. For example, if all amounts due
under the Notes have been paid and/or made subject to offset, and the Buyer
Group sustains Damages in the amount of $400,000.00 with respect to a matter for
which the Sellers have an obligation of indemnification (and the Company does
not make such payment to the Buyer Group), then T. Xxxxxx Xxxxxxx shall be
liable for $220,000.00 (55% of $400,000.00) and each of the other Members shall
be liable for a portion of the $400,000.00 in Damages corresponding to his or
her percentage of ownership of the Membership Interests in the Company owned as
of the Closing Date, such Membership Interest percentages being as set forth on
the signature page to this Agreement opposite the name of each Member.
12.3 Indemnification by Buyer. Subject to the terms and conditions
------------------------
of this Article XII, Buyer agrees to defend, indemnify and hold Sellers harmless
at all times from and after the Closing Date immediately on demand, against and
in respect of, and shall reimburse the Sellers for, any Damages incurred,
sustained, suffered by or resulting to Sellers, or any of them, arising out of,
resulting from, incurred in connection with or sustained as a result of:
43
(i) any inaccurate representation made by or on behalf of
Buyer in or pursuant to this Agreement, any Ancillary Agreement or any
certificate, instrument or document delivered pursuant hereto or thereto; or
(ii) any breach of any warranty made by or on behalf of
Buyer in or pursuant to this Agreement, any Ancillary Agreement, or any
certificate, instrument or document delivered pursuant hereto or thereto; or
(iii) any breach, default, nonfulfillment, nonperformance or
nonobservance by Buyer in the performance, fulfillment, or observance of any of
the obligations, covenants or agreements which are to be performed, fulfilled or
observed by or on behalf of the Buyer in or pursuant to this Agreement, any of
the Ancillary Agreements or any certificates, instruments or documents delivered
pursuant hereto or thereto; or
(iv) any breach or violation of any agreement, Contract or
understanding between a third party and Buyer or any of their agents or
Affiliates, or a breach of any fiduciary or other duty owed to such third party
by Buyer or any of their agents or Affiliates; or
(v) any other actions, inactions, deeds or courses of
conduct of Buyer or any other Persons acting on its behalf.
12.4 Procedure for Indemnification. If and whenever an Indemnified
-----------------------------
Party desires to claim indemnification for any of the matters for which
indemnification may be sought pursuant to the provisions of this Article XII,
such Indemnified Party shall deliver to the Indemnifying Party a Notice of Claim
specifying each of the matters for which indemnification is sought. Upon
receiving the Notice of Claim, the Indemnifying Party shall have the right,
exercisable at any time during a ten (10) Business Day period from the day of
the receipt of the Notice of Claim, to elect to compromise or defend against any
of the matters for which indemnification is sought through counsel of its own
choosing and at its expense, or at the election of the Indemnifying Party,
exercisable at any time within such ten (10) Business Day period, the
Indemnified Party shall have the right to compromise or defend against any of
the matters for which indemnification is sought, through counsel of its own
choosing and at the expense of the Indemnifying Party. If the Indemnifying
Party does not make either of the elections called for by this Section 12.4
within said 10 day period, or to the extent the Indemnifying Party fails to make
such election, then and in that event, the Indemnified Party shall have the
right to compromise or defend against any of the matters for which
indemnification is sought through counsel of its own choosing and at the expense
of the Indemnifying Party. Any Indemnified Party shall be entitled to be
represented by its own counsel at its own expense irrespective of any elections
made herein as to the appointment of counsel by the Indemnifying Party. If any
action or claim for which indemnification is sought is asserted both against the
Indemnifying Party and the Indemnified Party, and in good faith it is determined
there is a conflict of interest which renders it inappropriate for the same
counsel to represent both the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall be responsible for paying for separate
44
counsel for the Indemnified Party; provided however, that if there is more than
one Indemnified Party, the Indemnifying Party shall not be responsible for
paying for more than one separate firm of attorneys to represent the Indemnified
Party, regardless of the number of Indemnified Parties. The Indemnified Party
will not consent to the entry of a judgment or enter into any agreement with
respect to any matter for which indemnification is sought without the written
consent of the Indemnifying Party (not to be withheld or delayed unreasonably).
The Indemnifying Party shall not consent to the entry of a judgment with respect
to any matter for which indemnification is sought or enter into any settlement
with respect thereto which does not include a provision whereby the plaintiff or
claimant in the matter releases the Indemnified Party from all liability with
respect thereto, without the written consent of the Indemnified Party (not to be
withheld or delayed unreasonably). All attorneys and other representatives
employed by the Indemnifying Party shall be subject to approval by the
Indemnified Party, which approval shall not be unreasonably withheld or delayed.
12.5 Dispute as to Right of Indemnification. In the event the
--------------------------------------
question of the right to indemnification is submitted to a court of competent
jurisdiction for determination, all attorneys' fees and other costs and expenses
in litigating the question of the right of an Indemnified Party to
indemnification shall be awarded to the prevailing party and against the party
against whom such determination is rendered.
12.6 Right of Set-Off; Election of Remedies.
--------------------------------------
(a) Right of Set-Off. Upon notice to Sellers specifying in
----------------
reasonable detail the basis for such set-off, Buyer shall set-off any amount to
which it may be entitled under this Article XII against amounts otherwise
payable under the Notes to the extent still outstanding, in whole or in part.
The exercise of such right of set-off by Buyer in good faith, whether or not
ultimately determined to be justified, will not constitute an event of default
under the Notes. Neither the exercise of nor the failure to exercise such right
of set-off will constitute an election of remedies or limit Buyer in any manner
in the enforcement of any other remedies that may be available to it.
(b) Redress under the indemnity provisions contained in this
Article XII shall be in addition to, and not in lieu of any other remedy
available to the parties hereto for the matters covered by such provisions.
12.7 Indemnification of Negligence of Indemnified Party. THE
--------------------------------------------------
INDEMNIFICATION PROVIDED IN THIS ARTICLE XII SHALL BE APPLICABLE WHETHER OR NOT
THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE INDEMNIFIED PARTY,
OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE INDEMNIFIED PARTY, OR
THE SOLE OR CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE INDEMNIFIED PARTY,
EACH WITH RESPECT TO ANY INVESTIGATION OR DUE DILIGENCE CONDUCTED OR
45
PERFORMED BY AN INDEMNIFIED PARTY PRIOR TO THE CLOSING DATE IS ALLEGED OR
PROVEN.
12.8 Indemnification Cap and Deductible.
----------------------------------
(a) Neither Buyer nor Seller shall be liable for any claim for
indemnification pursuant to the provisions of this Article XII for any matter
for which indemnification is sought unless and until the aggregate amount of
Damages exceeds $50,000.00 (the "Deductible"). For purposes of the Deductible,
any materiality qualification of any representation, warranty, covenant or
agreement shall not be taken into account in determining the Damages for
purposes of determining whether the Deductible has been reached.
(b) Neither Buyer nor Sellers shall be liable for Damages with
respect to any matter for which indemnification may be sought in excess of
$1,500,000, which together with any interest that accrues on the Notes, is
herein referred to as the "Cap Amount". Neither Buyer nor Sellers shall be
liable for Damages with respect to any matter for which indemnification may be
sought in excess of the Cap Amount. Anything in this Agreement to the contrary,
the Deductible shall not apply to any Shortfall.
(c) Anything in this Agreement to the contrary notwithstanding,
(i) there shall be no Survival Date for claims for indemnification by the Buyer
Group with respect to the representations, warranties, covenants and agreements
in Sections 4.13(a), 4.14(a), 4.26, 4.27, 4.35, and 4.37, and 12.2(b), and (ii)
the Survival Date shall be five (5) years with respect to the representations,
warranties, covenants and agreements in Section 4.32.
12.9 Products Liability Insurance. Sellers hereby covenant and agree
----------------------------
to purchase and have in full force and effect as of Closing, one or more
discontinued products liability insurance policies relating to products
liability for products manufactured and sold prior to the date of Closing.
Buyer shall be named as an additional insured on such policies for a coverage
period of not less than three years from the date of Closing. Each of such
policies shall be maintained in full force and effect for not less than three
years from the date of Closing. Sellers shall deliver copies of such policies
and a certificate of insurance with respect to each of such policies to Buyer at
or prior to the date of Closing. Each of such policies shall contain a
provision whereby the coverage afforded by such policies and such policies may
not be cancelled or altered in any manner without Buyer having received at least
30 Business Days prior written notice of such cancellation or alteration.
Maintaining such policies and providing the coverage afforded thereby shall be
in addition to, but not in lieu of, any rights, remedies or privileges any of
the Buyer Group may have against Sellers for indemnification and recovery of
Damages pursuant to the provisions of this Article XII.
46
ARTICLE XIII
Survival of Representations and Warranties
------------------------------------------
All statements of fact, representations and warranties, covenants,
certificates, schedules, letters, documents or other instruments delivered by or
on behalf of any party hereto to the other pursuant to the terms of this
Agreement shall be deemed to be representations and warranties under this
Agreement, shall be deemed made both at the date made and at the Closing Date
and all of same shall (notwithstanding any exception, examination or audit made
by any person) survive the Closing Date and remain in full force and effect and
unimpaired until the Survival Date.
ARTICLE XIV
Failure to Close Because of Default
-----------------------------------
14.1 Seller Default: In the event that the Closing is not
--------------
consummated on or before the Cut-Off Date, by virtue of a default made by
Sellers in the observance or in the due and timely performance of any of the
covenants or agreements herein contained to be performed by any of Sellers,
Buyer shall be entitled, at its election, to specific performance of any of the
agreements contained in Section 11.2 hereof or to exercise any other legal or
equitable remedies to which it may otherwise be entitled with respect to
enforcement of such agreements, including the right to institute Proceedings and
recover its Damages.
14.2 Buyer's Default: In the event that the Closing is not
---------------
consummated on or before the Cut-Off Date, through no fault of Sellers and by
virtue of the default of Buyer in the due and timely performance of any of the
covenants or agreements herein contained to be performed by Buyer, Company, at
its election, shall be entitled to specific performance of any of the agreements
contained in Section 11.2 hereof or to exercise any other legal or equitable
remedies to which it may otherwise be entitled with respect to enforcement of
such agreements, including the right to institute Proceedings and recover its
Damages.
ARTICLE XV
Miscellaneous
-------------
15.1 Notices. All notices, requests, demands, and other
-------
communications required or permitted to be given or made hereunder by any party
hereto shall be in writing and shall be deemed to have been duly given or made
if delivered personally, or when deposited in the United States Mails and
transmitted by first class registered or certified mail, postage prepaid, return
receipt requested, or when sent by prepaid overnight delivery service, to the
parties at the
47
following addresses (or at such other addresses as shall be specified by the
parties by like notice):
If to Buyer: Consolidated Forest Products, Inc.
ATTN: Chairman of the Board
0000 Xx. Xxxxxxxxxx Xx., Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000; and
With a copy to: Xxxxxxx X. Xxxxxx
Xxxxxxx & Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000-0000
If to Company: Consolidated Forest Products, L.L.C.
c/o The Xxxxxxx Group, Inc.
No. 0 Xxxxxx Xxxx Xxxxxx, Xxxxx Xxx
Xxxxxxxxxx, Xxxxxxx 00000
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx & Xxxxxxx, L.L.C.
000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
If to Sellers: Sellers' Agent
T. Xxxxxx Xxxxxxx
No. 0 Xxxxxx Xxxx Xxxxxx, Xxxxx Xxx
Xxxxxxxxxx, Xxxxxxx 00000
15.2 Place of Performance. This Agreement and all obligations
--------------------
hereunder are fully performable in Birmingham, Alabama. This Agreement has been
delivered at and the transfers contemplated by this Agreement have been
consummated in Birmingham, Alabama. This Agreement and the Ancillary Agreements
shall be construed in accordance with and governed by the internal substantive
Laws, not the Law of conflicts, of the State of Alabama.
15.3 Captions. The captions used herein are for administrative and
--------
convenience purposes only and shall not be construed in interpreting this
Agreement.
15.4 Gender. Whenever the context so requires, the masculine shall
------
include the feminine and neuter, and the singular shall include the plural, and
conversely.
15.5 Invalidity. If any portion of this Agreement shall be held
----------
invalid or inoperative, then so far as reasonable and possible:
48
(1) The remainder of this Agreement shall be considered valid
and operative; and
(2) Effect shall be given to the intent manifested by the
portion held invalid or inoperative.
15.6 Amendment. This Agreement may be amended from time to time by
---------
an instrument in writing signed by all those who are parties to this Agreement
at the time of such amendment, such instrument being designated on its face as
an "amendment" to the Agreement.
15.7 Waiver. The failure of any party to insist in one or more
------
instances upon the performance of any of the terms or conditions of this
Agreement shall not be construed as a waiver or relinquishment of any right
granted hereunder or of the future performance of any such term or condition,
but the obligation of any party with respect thereto shall continue in full
force and effect.
15.8 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one instrument.
15.9 Remedies. Each party hereto acknowledges that a remedy at law
--------
for any breach or attempted breach of this Agreement will be inadequate, agrees
that such other party hereto shall be entitled to specific performance and
injunctive and other equitable relief in case of any such breach of attempted
breach and further agrees to waive any requirement for securing or posting of
any bond in connection with the obtaining of such injunctive or other equitable
relief. Such remedies shall be cumulative and not exclusive and shall be in
addition to any other rights or remedies any party may have against the other.
15.10 Attorneys' Fees. If any action at law or in equity, including
---------------
any action for injunctive or declaratory relief, is brought to enforce or
interpret any of the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and expenses from the other
party, which fees and expenses may be set by the court in the trial of such
action or may be enforced in a separate action brought for that purpose and
which fees and expenses shall be in addition to any other relief which may be
awarded.
15.11 Time of Essence. Time shall be of the essence of this
---------------
Agreement and the Ancillary Agreements and throughout the term of this Agreement
and the Ancillary Agreements.
15.12 Binding Effect. This Agreement and the Ancillary Agreements
--------------
and schedules attached hereto, as well as all covenants, agreements,
representatives, warranties or obligations contained in any of same shall be
binding upon and inure to the benefit of the parties hereto,
49
their respective successors, assigns (if permitted), receivers, trustees or
other legal representatives. Buyer shall have the right to assign this
Agreement and all rights, remedies or privileges or benefits hereunder to any
Affiliate of Buyer. Notwithstanding any other provision herein or in any
Ancillary Agreement, neither this Agreement nor any of the Ancillary Documents
shall create benefits on behalf of any person who is not a party hereto.
15.13 Entire Agreement. This Agreement (and the exhibits and
----------------
schedules attached hereto) contains the entire agreement between the parties
hereto with respect to the within subject matter and supersedes any and all
prior agreements, whether written or oral, with respect thereto.
15.14 Mediation; Arbitration. If at any time a dispute or
----------------------
controversy should arise between Sellers and Buyer (the "Contestants") with
respect to an interpretation or the enforceability of any of the provisions of
this Agreement or with respect to any of the covenants or agreements contained
in this Agreement, the Contestants shall meet in the Birmingham, Alabama
metropolitan area at a mutually agreed upon time and place within thirty (30)
days of the receipt of notice by any Contestant from any other Contestant to
meet to attempt to settle such dispute or controversy. If, as a result of such
meeting or any mutually agreed subsequent meetings held within thirty (30) days
thereafter, the Contestants are unable or unwilling to agree on an appropriate
resolution of such dispute or controversy, then and in such event such dispute
or controversy shall be submitted by the parties to binding arbitration to be
conducted before a panel of arbitrators (i) if such arbitration is requested by
the Sellers, in the Dallas-Fort Worth metropolitan area in accordance with the
Texas Rules of Civil Procedure and unless inconsistent, the Commercial
Arbitration Rules of the American Arbitration Association (or any successor
organization thereto) as then in effect (the "AAA Rules") or (ii) if such
arbitration is requested by the Buyer, in the Birmingham, Alabama metropolitan
area in accordance with the Alabama Rules of Civil Procedure and unless
inconsistent, the AAA Rules. Any arbitration decision shall be final and
conclusive upon the Contestants, it being expressly agreed and understood by the
Contestants that any specific issue or issues relating to disputes so determined
shall not be the subject of any further dispute among the Contestants or the
subject of any further arbitration under this Section 15.14. The arbitrator's
award in any such arbitration shall be final and binding and a judgment upon
such award may be enforced by any court of competent jurisdiction. The expenses
of such arbitration, including the fees of the arbitrators, shall be borne
equally between the Contestants unless otherwise specified in the award. Each
Contestant shall pay the fees and expenses of its own witnesses. The prevailing
Contestant shall be entitled to recover its attorneys' fees and expenses unless
otherwise specified in the award.
15.15 Business Records. Company shall have reasonable access to and
----------------
the right to photocopy (with assistance of Buyer's employees) all records
related to the operation of the Business subsequent to Closing for a period of
up to five (5) years for accounting and income tax return purposes, and with
respect to litigation and administration of Excluded Assets and Retained
Liabilities.
50
15.16 Guaranty of Buyer's Obligations. To induce the Sellers to enter
-------------------------------
into this Agreement and to induce Sellers to approve the transactions
contemplated therein, Kevco, Inc., a Texas corporation, and sole shareholder of
Kevco Delaware, Inc., Buyer's parent, does hereby join in this Agreement for the
sole and express purpose of unconditionally guaranteeing the prompt payment of
all of the Buyer's payment obligations and performance of all other obligations
of the Buyer under this Agreement including, without limitation, (i) the payment
of the Purchase Price and payment and due performance of the Assumed
Liabilities, or (ii) payment of all Damages of Sellers for which Buyer is
responsible pursuant to the indemnification provisions of Article XII.
51
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
BUYER:
CONSOLIDATED FOREST PRODUCTS, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Its: Chairman of the Board
COMPANY:
CONSOLIDATED FOREST
PRODUCTS, L.L.C.
By: /s/ O'Xxxx Xxxxxx
----------------------------------------
O'Xxxx Xxxxxx
Its: Member
By: /s/ T. Xxxxxx Xxxxxxx
----------------------------------------
T. Xxxxxx Xxxxxxx
Its: Member
SELLERS' AGENT:
By: /s/ T. Xxxxxx Xxxxxxx
----------------------------------------
T. Xxxxxx Xxxxxxx
52
MEMBERSHIP INTEREST MEMBERS OF COMPANY:
PERCENTAGE
----------
/s/ T. Xxxxxx Xxxxxxx
-------------------------------------------
55% T. Xxxxxx Xxxxxxx
/s/ O'Xxxx Xxxxxx
-------------------------------------------
10% O'Xxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
12.5% Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxx
-------------------------------------------
5% Xxxxxxx Xxxx
/s/ Xxxx Xxxxxx
-------------------------------------------
5% Xxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
2.5% Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
2.5% Xxxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------------------
2.5% Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxxxx
-------------------------------------------
2.5% Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxx
-------------------------------------------
1.25% Xxxxxxx Xxxxxxx
/s/ Xxx Xxxxxx
-------------------------------------------
1.25% Xxx Xxxxxx
53
KEVCO, INC.
(for purposes of Section 15.16)
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
Its Chairman of the Board
and President
54
DEFINITIONS
-----------
Certain Defined Terms. As used in this Agreement, each of the following
terms has the meaning given it below:
"Accountants" means Coopers & Xxxxxxx, L.L.P.
"Affiliate" means, with respect to any Person, any other person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Ancillary Agreements" means, collectively the Xxxx of Sale, Assumption
Agreement, the Notes, the Employment Agreements and the Non-Compete Agreements.
"Applicable Law" means any Law of any Governmental Entity to which a
specified Person or property is subject.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that primarily forms or is likely to be the
primary cause for any specified consequence.
"Business" means the manufacture, distribution and sale of wood trusses,
other wood products, raw lumber and/or notched lumber to the furniture
manufacturing, manufactured housing and recreational vehicle industires, and the
supply and rendering of other services ancillary and incidental thereto.
"Business Day" refers to a day, other than a Saturday or a Sunday, on which
commercial banks are required or authorized to be open in the City of Fort
Worth, Texas.
"Code" means Internal Revenue Code of 1986, as amended.
"Contracts" refers to, collectively, all oral or written contracts,
agreements, commitments, instruments, guaranties, bids and proposals to which
Company is a party as of the date specified, all unfilled orders outstanding as
of the Closing Date for the purchase of raw materials, goods or services, and
all unfilled orders outstanding as of the Closing Date for the sale of raw
materials, goods or services.
"Costs of Remediation" refers to all Damages arising out of or related to
(i) those items listed or referred to on Schedule 4.32; (ii) the presence of any
Hazardous Materials existing as of the Closing Date at any Owned Real Property
or Leased Property at or to which the Company disposed, transported, stored,
treated or arranged to dispose Hazardous Materials
55
prior to the Closing Date (including, without limitation, off-site liability
under any Environmental Law arising from or in connection with transportation,
treatment, storage disposal, or arranging for disposal of Hazardous Materials);
and (iii) the Release of any Hazardous Materials on or before the Closing Date
from any of such property, including, without limitation, fees for services of
attorneys, consultants, contractors, experts and laboratories, and all other
out-of-pocket costs, incurred in connection with investigation,
characterization, remediation or mitigation thereof.
"Damages" refers to, in respect of any obligation to indemnify any
Person, pursuant to the terms of this Agreement, any losses, amounts paid in
settlement, Taxes, claims, damages, liabilities, obligations, judgments,
settlements, diminution in value, and costs and expenses (including costs of
investigation or enforcement or supported by any Indemnified Party and
attorneys' fees), including all special or punitive damages which are assessed
against or supported by an Indemnified Party for any reason.
"Employee Benefit Plans" refers to an Employee Pension Benefit Plan or
an Employee Welfare Benefit Plan where no distinction is required by the context
in which the term is used.
"Employee Pension Benefit Plan" has the meaning set forth in Section
3(2) of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA.
"Encumbrance" means any Lien.
"Environmental Laws" refers to any existing federal, state, or local
statute, regulation or ordinance, or any existing judicial or administrative
decree or decision with respect to any Hazardous Materials, drinking water,
ground water, landfills, open dumps, storage tanks, underground storage tanks,
solid waste, waste water, storm water run-off, waste emissions or xxxxx.
Without limiting the generality of the foregoing, the term will encompass each
of the following statutes, and the regulations promulgated thereunder, in each
case as in effect as of Closing: (a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (b) Occupational Safety and
Health Act of 1970, as amended, (c) the Resource Conservation and Recovery Act
of 1976, as amended, (d) the Hazardous Material Transportation Act, as amended,
(e) the Toxic Substances Control Act, as amended, (f) the Clean Water Act, as
amended, (g) comparable state and local Laws, and (h) other health, safety and
environmental protection Laws in effect on the date of this Agreement and as of
the date of Closing.
"ERISA" refers to the Employee Retirement Income Security Act of 1974
as amended.
56
"GAAP" refers to generally accepted accounting principles as in effect from
time to time.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign).
"Hazardous Materials" means any substance, material or waste which is
regulated by any applicable local, state or federal Governmental Entity,
including without limitation, any material, substance or waste which is defined
as "hazardous", "hazardous waste", "hazardous material", "hazardous substance",
"extremely hazardous waste", "restricted hazardous waste", "pollutant",
"contaminant", "toxic substance" or "toxic waste" under any provision of any
applicable Environmental Law, and includes, but is not limited to, petroleum,
petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"HSR Act" refers to the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of
1976, as amended.
"Indebtedness" means any obligation, whether or not contingent, (i) in
respect of borrowed money or evidenced by bonds, notes, debentures, or similar
instruments, (ii) representing the balance deferred and unpaid of the purchase
price of any property (including pursuant to capital leases), if and to the
extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet prepared on a consolidated basis in accordance with GAAP, or (iii)
guaranties, direct or indirect, in any manner, of all or any part of any
Indebtedness of any Person.
"Intellectual Property" means patents, trademarks, service marks, trade
names, copyrights, trade secrets, know-how, inventions, brand names, labels,
customer lists, logos, rights in computer software, rights granted or retained
in licenses under any of the foregoing, and similar rights utilized by Company
or Buyer, as the case may be, in its business and all registrations,
applications, licenses and rights with respect to any of the foregoing.
"Knowledge" as applied to either Sellers or Buyer, refers to the actual
knowledge, after due inquiry, of any of Sellers or of any officer, manager, or
director of Company or Buyer or other representative having responsibility for
such matters.
"Law" means all applicable federal, state, local, foreign or other laws
(including common law), statutes, ordinances, regulations, rules, codes, writs,
judgments, orders or decrees.
"Lien" refers to any mortgage, pledge, security agreement, charge,
restriction, easement or other encumbrance of any type or character.
57
"Material" as applied to any matter means having a value or effect of at
least $25,000 individually or in the aggregate.
"Material Adverse Effect" refers to a material adverse effect with respect
to the results of operations, properties, operations or financial condition of
Company or Buyer, as the case may be, or its business, taken a whole.
"Permits" refers to any licenses, permits, franchises, consents,
approvals, variances and other authorizations of, from or required by any
Governmental Entity under any applicable law.
"Person" refers to any individual, partnership, corporation, trust,
association, limited liability company, Government Entity or any department or
agency thereof, or any other entity.
"Proceedings" means all proceedings, actions, claims, suits, audits,
investigations and inquiries by or before any arbitrator or Governmental Entity.
"Release" refers to any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing, escaping, leaching, dumping, burying,
abandoning or disposing into the environment.
"Tax" refers to all federal, state, local and foreign taxes, charges, fees,
levies, penalties, duties or other assessments, including, without limitation,
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, withholding, social security, disability, real property, personal
property, ad valorem or other tax or governmental fee of any kind whatsoever
imposed or required to be withheld by any Governmental Entity, whether disputed
or not.
"Tax Return" means any tax return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
58
